Reasons for failur in automatic trading systems

Quote from man:

Don

there are automatic trading system constantly in place, otherwise markets would not be as efficient as they are.

that does not mean that there is opportunity for the average guy, but saying it does not exist is alomst naive. just look at index and futures, i doubt they are kept in line by discretionaries only. different exchanges trading the same instruments, different exchanges in different currencies, option markets you name it ... there is constantly arbitrage happening, it is just not accessible with our normal fee/speed/knowhow setup.

yes, the best single market pattern recognition is in your head, but just try for once to watch five 125.000 stock pairs and trade five hundred of these twice a day ... our mind is perfect on selective, yet fails on mass data ...

strange, would not have expected this line of argument by someone with your reputation ...

yet, peace
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I never said that there are not automated programs in place, heck we place hundreds of thousands of orders per minute with some of ours....my point is only that there is no black box that will consistently make money...simply because there is no absolute trading system that I have ever seen...and, yes, we have "constant arbitrage" going...with the "hopes" that more money will be made....


Don
 
Quote from Don Bright:

I never said that there are not automated programs in place, heck we place hundreds of thousands of orders per minute with some of ours....my point is only that there is no black box that will consistently make money...simply because there is no absolute trading system that I have ever seen...and, yes, we have "constant arbitrage" going...with the "hopes" that more money will be made....


Don
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then i don't get your point. i mean we are always talking about risk taking here, since i doubt that any person on ET does real arbitrage. metooxx might be nearest to it, but he runs liquidity risk in at least some of his combined option-strategies.

by automisation nobody intended "risk free" ... at least i did not interpret it that way ...
 
There are reliable system developers.

Systems? I agree 100% with Don.

I can say this to Don and "some" (again... SOME)...

A good system doesn't necesarrily mean, a system that lasts a long time or makes the most money. Hopefully, people can ask themselves what a good system is and start pursuing of what is.
 
Quote from man:

grob

could you sum up your post within five lines?
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Gladly, an automated system must focus on what, why and how markets work. Where and when to focus intimately is the crux of producing timely automated decision making signals for the benefit of the operators. Several variables are available and these may be processed (coded functionally) to achieve a high and precise focus at all times. Sufficiency reigns. Read slowly and get the connections among 3 sentences.
 
Quote from Grob109:

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To design and build what you want to supply takes the coding of several (many many in fact) items arranged in an array that involves seven processes which feed each other in an arrangement of links and nodes. I gave two examples of nodes in a post recently: sentiment and pace; six levels of one and five levels of the other. All eleven signals of their presence or absence (think Boolean) serve to "gate" other information to other nodes. All of this is secondary in nature and the primary considerations are more complex.
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Thank you for your detailed and very interesting answer.
I have many questions for you but I'll ask just one:
Regarding the quote above - can you elaborate on that or link to some reading on the subject? I mean the items, signals, nodes and the levels...

Thanx,
cohvi.
 
the reason for *failur* is that people often forget about their e's :-)
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The thing is, I've developed it using information for the last 3 months only, and then backtested it on the past 2-4 years.
It did great - 10-50 pips a contract per month on 6 main indices without any big drowdowns.
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just one serious comment though, backtesting means you develop on some data, then test on data subsequent to the period on which you developed the model.... you dont develop a model based on 2006 data and go "backtest" on 2000-2005 data, all that test would tell you that you could have made money in 2000 had you been able to look ahead to 2006 for clues as to how market behaves....
 
Quote from cohvi:

Thank you for your detailed and very interesting answer.
I have many questions for you but I'll ask just one:
Regarding the quote above - can you elaborate on that or link to some reading on the subject? I mean the items, signals, nodes and the levels...

Thanx,
cohvi.
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All that you want is available and is being given an iterative refinement (they want to change the symbols on the logic sheets...lol..).

Your best bet is to be a fly on the wall of the team that is doing the overhaul (especially if you are great at recoding functions).

You are very clear on how to go about your task. Items, signals, nodes and especially levels are the four considerations for getting solutions.

I can get to you the various matrices that have the levels of the feeds (items) that go into the function nodes which "output" the signals.

Usually any item (feed) has five levels of measurement and each level is optimized to act as a band pass filter. Levels go to different nodes.

Function nodes do have many feeds and some of them serve a gating output function to impose the signal into the part of the system that produces (triggers) values (Actual prices, hold timing, etc. for trading AND protection).

For logic Buzzsaw is best (D size drawings) for other stuff like matrices and charts and tabular, attachments to emails are best.
 
It did great - 10-50 pips a contract per month on 6 main indices without any big drowdowns.
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oh and by the way what exactly is a pip per contract on an index contract?

if you mean listed currency contracts, i believe 50 pip per month is only 6 percent return per year..... without leverage anyway....

the french word "pipe" means blowjob, however, i suppose you werent talking about arbitraging the blowjobs markets? me, i wouldn't need more than 30 "pipes" per month...
 
Quote from Grob109:

Gladly, an automated system must focus on what, why and how markets work. Where and when to focus intimately is the crux of producing timely automated decision making signals for the benefit of the operators. Several variables are available and these may be processed (coded functionally) to achieve a high and precise focus at all times. Sufficiency reigns. Read slowly and get the connections among 3 sentences.
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ah ... okay. ... slowly.
 
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