just starting, need advice.

V

vladiator

Hi guys. A little background first. I'm finance PhD student and have developed a rather profitable trading rule using intraday data. The rule is very robust in predicting close to open movements in stocks that fit certain criteria. I'm thinking of starting an LLC with a seed capital of around 50-100 grand to see if/how well it works in reality. Although I have a lot of education, I have to honestly admit I have no experience trading. What tools would you recommend? The rule was based on average quotes posted within 5-10 minute intervals when trades are to be executed - hence, it presupposed that if a market order is placed some time within those intervals, those would be the average prices I'd have to pay or would receive on a sell. I reallize the danger of market orders (although it is directly incorporated into the rule and it is still profitable) and am considering switching to limits instead. Commision difference is no big deal. From your experience, if I place a, say, limit buy, and the price declines below the limit, how likely am I to get screwed and get it filled at the limit price and not at the prevailing market price that would be lower?
If it works the way it seems to on paper, I'll be trading around 4000-5000 per trade. What tools would you recommend? I don't want to pay a per share cost, given the volumes involved. I was thinking of starting out with Ameritrade and then maybe switching to direct access.
Also, what is your experience as far as afterhours trading is concerned (big cap big volume stocks)?
Thanks a bunch in advance.
 
You're going to get killed.

And are you going to START with 5k shares? That's insanity.

Get IB or Pointdirex or another cents/share broker. Trade 100 share lots until you make money consistently.

Good luck.

-> This is called word-recycling

(no it's not me, is someone trying smth on me?)
 
Originally posted by vladiator
Hi guys. A little background first. I'm finance PhD student and have developed a rather profitable trading rule using intraday data.
More...

how come all "Vla..." guy seem pretty smart :) in current issue of S&C mag, Don Bright said people come up with pages after pages of good trading system but come up short when it is in real trade. I guess you will hear from him soon.
 
Oh, come on you folks and your "get killed" story! What I have done testing the strategy amounts to having traded it for more than a year real time. 98% of trades are profitable, bootstrap simulations etc only confirm it. The reason I need big volume it to MAKE money. 100 shares per trades will not even pay for commissions. I was not asking you if I'd get killed or not, if I do, my investors get a tax deduction and I move on to something else.
 
Vladiator,
You will probably get some "you'll get killed" posts. :D
Unfortunately, unlike on a telephone conversation where when you say something with a smile, the other will know, for posting, we don't really know how the posters said what seems to be mean... except maybe some smilies.:)

I found that trading on paper (or simulations software) with or without trading systems works very well, but when you go live, it's a different story because when all your indicators tell you it's the time to go in (buy or sell), you don't necessary get the shares you wanted.

As for your question of your limit buy and the price goes down pass your limit: you will get filled (and killed ? :p ) at your limit price, ALL the time. There are daytraders who just love slow moving fingers of others traders (too slow to cancel a limit buy), especially when it's a juicy 4000 to 5000 shares.

Metoxx may give you some more infos on developping trading programs, I think he (they) uses it a lot.


...it's a beautiful sunny day outside... I don't know why I'm indoor surfing the net ...?
DOING MY TAXES !!! that's why !!!:mad:
 
Thanks for your kind reply. More on the limit order though. Is it not supposed to automatically become a market order without having to be cancelled and reentered as such? Weird.
 
I really was, until you came back with the "98%" of trades profitable comment. I have answered a zillion questions about paper trading, and how the results always paint a rosy picture...and then lose the "borrowed" money.

It is in the best interest of all who trade for a living to help new people get into the game correctly, and that starts with "parking ego's at the door." I don't want to get off on the wrong foot with you, but you should really listen to some of the people on this board. My name may come up often, but a lot of the true knowledge comes from these traders.

Put up $10K of your own money, trade 100-500 share lots, real time-real money, and then see how well you do.

It must have cost considerably more than $10K to get your education, so simply pretend that this "real world" education is what is need to graduate.

I'm sure you're a smart guy, and we are really trying to help....feel free to ask for help...or to tell me off (whatever your preference).... Good Luck!! :-)
 
I'm sorry if my reply your referred to sounded ego-provoked. I was just trying to refocus the discussion on the original question. The reason I don't mind starting big is b/c I have investors who don't want me to say "well, so far I've only been using 1% of your investment to see if my strategy works." I have been told to put it to the test full force. For them, it's just a gamble that my results work in practice and only a trivial portion of their wealth is at stake. What I have seen so far does not appear to bode well for the application.
Let's say I can predict that if a certain stock is bought at the average of all ask quotes posted in the last, say, 15 minutes of trading today and sold at the going bids tomorrow, the rule will return around 1.5-2%. The posts I read yesterday in other threads seem to indicate that one should almost never use market orders. On the other hand, today's posts imply that a limit order doesn't give a lot of benefits it's supposed to give either. By examining average quotes I kind of take care of the movement within the interval when the trade is to be executed.
If I assume that the buy order gets filled at the maximum ask all the time, the profits become indistinguishable from zero, but still not negative, so in the worse case scenario, I'll just look on commissions.
What's the best way I can buy large quantities before the close and sell at or soon after the open and get the prices that are close to what is quoted???
Aren't large trades that in my case help out the market maker when the conditions are against him and his inventories are out of balance supposed to be providing liquidity and getting even better prices than what is quoted???
Thanks for your help.
V.
 
Originally posted by vladiator
I'm sorry if my reply your referred to sounded ego-provoked. I was just trying to refocus the discussion on the original question. The reason I don't mind starting big is b/c I have investors who don't want me to say "well, so far I've only been using 1% of your investment to see if my strategy works." I have been told to put it to the test full force. For them, it's just a gamble that my results work in practice and only a trivial portion of their wealth is at stake. What I have seen so far does not appear to bode well for the application.
Let's say I can predict that if a certain stock is bought at the average of all ask quotes posted in the last, say, 15 minutes of trading today and sold at the going bids tomorrow, the rule will return around 1.5-2%. The posts I read yesterday in other threads seem to indicate that one should almost never use market orders. On the other hand, today's posts imply that a limit order doesn't give a lot of benefits it's supposed to give either. By examining average quotes I kind of take care of the movement within the interval when the trade is to be executed.
If I assume that the buy order gets filled at the maximum ask all the time, the profits become indistinguishable from zero, but still not negative, so in the worse case scenario, I'll just look on commissions.
What's the best way I can buy large quantities before the close and sell at or soon after the open and get the prices that are close to what is quoted???
Aren't large trades that in my case help out the market maker when the conditions are against him and his inventories are out of balance supposed to be providing liquidity and getting even better prices than what is quoted???
Thanks for your help.
V.
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LOL, I find it quite amusing that you think that you have found investors who are willing to waste 100k. I know that you said that it is a small amount in proportion to their net worth, but you need to evaluate whether or not they are really willing to part with that money. They most likely say what they don't mean...
 
I don't see why what they are doing is irrational in any way or can be deemed wasteful. They are betting on something that has relatively high odds of providing a good return. Some people waste thousands in Vegas per night, although the odds are far from being in their favor. In a state where gambling is forbidden, this appears like a very smart alternative. Besides, (having parked my ego outside), I still have to say that it's rather presumptous of you to call some strategy a likely waste of investment if you know absolutely nothing about it, what sound principles it's based on an how robust it is in a myriad of tests. Just because you, or most others had to lose a lot when they started (probably without a strong strategy in many cases), doesn't mean everyone else has to.
And I DID make sure the investors were serious about knowing that the money could be lost and that they are willing to take the risks.
 
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