Poll: Automated or Discretionary, which has been more profitable for you?

[tycoonman]

Quote from Rabbitone:

I’m a retired Computer professional who trades. I taught computer science and wrote my first commercial system in 1973.

How hard can it be to automate to trade? It is hard. Try programming the trend. Sure linear algebra is involved. But try to get this trend you program to tell you the most profitable entries and exits for any type of price data, in any time interval, for different types of securities, with changes in volatility, with erratic price activity and noise (like huge gaps up or down on earnings day) and for price gyrations (first price bar intraday) to name a few. Oh yeah then there are black swans and who knows what else.

ok so we're talking more an aptitude for CS in the realm of machine learning rather than pure maths. Probably more engineering logic than the actual algorithms themselves. Especially at high speeds.

I just don't like it when people try to compare market modeling to solving poincare conjecture or something like that.

 

[kentraderstar]

Quote from tycoonman:

ok so we're talking more an aptitude for CS in the realm of machine learning rather than pure maths. Probably more engineering logic than the actual algorithms themselves. Especially at high speeds.

I just don't like it when people try to compare market modeling to solving poincare conjecture or something like that.

Apparently, you do not know anything about computer. I have a graduate degree in electrical engineer and engineer in computer science MIT

 

[tycoonman]

Quote from kentraderstar:

Apparently, you do not know anything about computer. I have a graduate degree in electrical engineer and engineer in computer science MIT

right. phd from MIT is trolling the ET boards.

im working on my undergrad, but if im on elittrader with a doctorate in the future, then remind me to kill myself.

 

[Rabbitone]

I forgot to add something as I just got done looking at one of my automated trading systems. This system produces some dam good trades. But I cannot trade it 60% of the time. It is a volatility based system. The problem with this system is if volatility gets too high it produces long strings of small consecutive losses as high a 7 or 8 straight; which I have never been able to stomach. So the system sits idle most of the time because I won’t risk having to stomach a 8 straight (small) loss draw down.

This is the other intangible in building an automated system. Traders all make the assumption that if your can program it to make profits you can trade it. Sorry that is just not the case. Automated systems can produce trades that just don’t fit a trader’s goals and objectives.

For example I have another system that produces a high winning percentage (from 55% to 63%) but a low W/L around 1.40. The system works but has the problem of the equity curve going flat for 5 or 15 trades before resuming the climb. This does not fit with my goals and objectives.

The point is whether you trade automated or discretionary a big part of the process is finding an edge that you feel comfortable with (that you can sit through the systems quirks).

Quote from tycoonman:

Quote from ElecEquity:

I have absolutely ZERO background in mathematics or programming and I have 2 live profitable automated systems with one performing well in testing which may be live soon. All automated trading doesn't have to consist of HFT -- mine doesn't. Now for HFT, you're probably right about needing an extensive mathematics background. [/QUOTE

what exactly would you have to know extensively for math thats not already learned in CS?

I mean, to be a programmer you need to know linear algebra and thats about it. Other than linear algebra, what else would you need to know and for what? Analysis/Advanced Calc etc.,??? I don't see how the latter would be used in finance...

 

[kentraderstar]

Quote from tycoonman:

right. phd from MIT is trolling the ET boards.

im working on my undergrad, but if im on elittrader with a doctorate in the future, then remind me to kill myself.

you are just pretending to be a computer genius. It is all written from your elite history.

 

[Rabbitone]

I was a DBA in a steel mill where we converted the chemical formulas and mechanical processes into a Oracle Rule based system. They used Smalltalk on PC’s hooked to our MODCOMPs to plug in actual steel making results and modify our rule base. This is not as hard as people think it is. It is just time consuming to build a working system.

Anyone who trades profitably is already using a simple form of AI. You are the expert system with rules to handle any trading situation. A discretionary set up is a manual AI rule. All you have to do is start a journal and you can build a base that tells you what you can and cannot do with your object (trade) that worked or did not.

There is always going to be room to squeeze in a make a profit no matter what they throw at us. We can adapt far quicker than a room full of programmers.

Quote from tycoonman:

lets just say when they start incorporating AI techniques (which they may have already) retail traders are effed. luckily for us, the real engineers/scientists worth a damn don't care about finance...its all the phds and masters that either really needed the money, or were too stupid to get into something scientifically inclined.

you think a robotics phd working on quantum computing is sitting there trying to program an algo? LOL. no, its the guy that got a masters in CS from for local state uni then didn't get job offers worth the bang for the buck, and so he went into finance -- can't really blame him though.

 

[Zr1Trader]

Interesting replies so far, very good.

As far as automation, I agree with lindq. You don't have to be a complete rocket scientist to have an automated system using colocation , hft, and millions in hardware. You know there are "edges" for the little guy to exploit too. I can get in and out of a trade in a flash. A big hedge fund can't without adverse effects.


I think that the best edges are not programmable. Thoughts?

 

[The Big D]

Quote from Jackie Treehorn:

Im fairly competent in both, but i wouldn't kid myself into thinking i could compete with 100 code breakers/voice recognition guys at renaissance....

I have no idea what they're doing at renaissance, but I know for a fact that there are plenty of trading opportunities with good return which are algorithmic/automatable in nature which are not HFT or difficult to program. Really that stuff only comes into play when you're trying to do automated market making and REALLY only when you have an obligation to be on NBBO some percentage of the time.

 

[The Big D]

Quote from tycoonman:

???

im a applied math/CS major myself...is there something these HFT guys are capable of programming that your regular developer can't? I don't get it.

C# or C++ should be more than enough (depending on broker's API) to create competative system, no? real question...

It's not a matter of language - C is good enough for nearly anything. Your OS and library facilities will be more of an issue.

The real difficulty is understanding that style of programming where the are a large number of things going on at once asynchronously, and those things may be in error, and there are odd delays (in this case due to network latency). Despite being done on big hardware, it's more like embedded or OS programming than application programming. Not hard for someone with the right background, but not trivial.

My point is simply that unless you just have to do automated market making, there are better opportunities elsewhere that don't require that level of sophistication.