StrataSearch Software

[intradaybill]

Quote from taowave:

systems.It can be a pure backtester,or it will search hundreds of thousands of combinations and permutations of the selected rules to generate systems.

This is fine but keep in mind that it offers no edge. In the last 20 years or so that backtesting programs are available, developers have tested and traded every conceivable permutation of known rules and indicators. The markets has faded each and everyone of them. High percentage of technical traders lose money.

Nobody should dispute that to profit in the markets you need an edge. An adge cannot be a permutation of known rules or indicators. That does not constitute discovery of a trading system but just optimization.

Again, I'm not disputing the fact that SS is a fine program. I wouldn't call it a trading sytem discovery program though. It does not discover anything new. It is just a fancy backtesting program.

 

[taowave]

Bill,there is no edge in trading unless you are trading customer flow for an investment bank, pushing obscenely high vol on customers thru structured notes,or happen to excel at information arbitrage....For what its worth,this is coming from the ex head trader of equity derivatives at a major investment bank....

Quote from intradaybill:

This is fine but keep in mind that it offers no edge. In the last 20 years or so that backtesting programs are available, developers have tested and traded every conceivable permutation of known rules and indicators. The markets has faded each and everyone of them. High percentage of technical traders lose money.

Nobody should dispute that to profit in the markets you need an edge. An adge cannot be a permutation of known rules or indicators. That does not constitute discovery of a trading system but just optimization.

Again, I'm not disputing the fact that SS is a fine program. I wouldn't call it a trading sytem discovery program though. It does not discover anything new. It is just a fancy backtesting program.

 

[ronblack]

Quote from taowave:

Bill,there is no edge in trading unless you are trading customer flow for an investment bank, pushing obscenely high vol on customers thru structured notes,or happen to excel at information arbitrage....For what its worth,this is coming from the ex head trader of equity derivatives at a major investment bank....

Are you suggesting we stop trading right now?

First of all, the first edge you described is illegal and it is called "front running". If you ever try to exploit such an edge you will probably end up with a huge fine and maybe behind bars.

There are ways to find an edge before other do but it won't last for long. However, you can make enough to become financially independent and have time to look for the next edge. Keeping the same edge for a long time is a mistake most traders make. You should be able to understand when your edge is no longer working and look for a new one.

I think Bill is correct. SS does not appear to be the kind of program that will find an edge. On the contrary, TSL and APS have this potential because they can discover unknown rules. This is the point Bill tried to make.

Ron

 

[taowave]

Trading customer flow is illegal?????

Its called market making

I take it you have never worked in an investment bank.....

There are a handful of traders who can successfully exploit an "edge",and I am not talking about credit or financing edges...

Cant comment on systems I am not familar with..

Quote from ronblack:

Are you suggesting we stop trading right now?

First of all, the first edge you described is illegal and it is called "front running". If you ever try to exploit such an edge you will probably end up with a huge fine and maybe behind bars.

There are ways to find an edge before other do but it won't last for long. However, you can make enough to become financially independent and have time to look for the next edge. Keeping the same edge for a long time is a mistake most traders make. You should be able to understand when your edge is no longer working and look for a new one.

I think Bill is correct. SS does not appear to be the kind of program that will find an edge. On the contrary, TSL and APS have this potential because they can discover unknown rules. This is the point Bill tried to make.

Ron

 

[intradaybill]

Quote from taowave:

Trading customer flow is illegal?????

Its called market making

I take it you have never worked in an investment bank.....

There are a handful of traders who can successfully exploit an "edge",and I am not talking about credit or financing edges...

Cant comment on systems I am not familar with..

Wait a sec... Making money trading customer flow is a lot different than using customer flow as an edge, something you alluded to when you wrote:

"Bill, there is no edge in trading unless you are trading customer flow for an investment bank..."

So what did you mean that Ron did not understand? Making commissions is not and edge of any kind. Since you alluded to an edge, one could easily interpret this as exploitation of customer flow to benefit from own trades.

Market making is a business that also involves risk. Market makers get a license to do what they do because they are required to provide liquidity. If an unexpected event occurs and have a large position against the market they can lose a lot of money.

If a market maker uses order flow to benefit from own trades, as far as I know, I will agree with Ron that this is illegal practice.

 

[taowave]

The EDGE is in having flow.


People pay for flow

Forget commisions....

Quote from intradaybill:

Wait a sec... Making money trading customer flow is a lot different than using customer flow as an edge, something you alluded to when you wrote:

"Bill, there is no edge in trading unless you are trading customer flow for an investment bank..."

So what did you mean that Ron did not understand? Making commissions is not and edge of any kind. Since you alluded to an edge, one could easily interpret this as exploitation of customer flow to benefit from own trades.

Market making is a business that also involves risk. Market makers get a license to do what they do because they are required to provide liquidity. If an unexpected event occurs and have a large position against the market they can lose a lot of money.

If a market maker uses order flow to benefit from own trades, as far as I know, I will agree with Ron that this is illegal practice.

 

[intradaybill]

Quote from taowave:

The EDGE is in having flow.


People pay for flow

Forget commisions....

I think you are talking about different things here. You sound like a broker. Most people here are traders. Of course, brokers need order flow and pay for liquidity. But order flow is not an edge.

When people in these threads talk about an adge they mean a system or startegy of some kind, mechanical or discretionary, that can produce consistent returns in the medium to longer term.

 

[QQQShort]

Quote from intradaybill:

When people in these threads talk about an adge they mean a system or startegy of some kind, mechanical or discretionary, that can produce consistent returns in the medium to longer term.

I agree with your description of an edge, but do not understand the belief that APS can be used to develop an edge and Stratasearch cannot.

 

[drsteph]

Quote from intradaybill:

I think you are talking about different things here. You sound like a broker. Most people here are traders. Of course, brokers need order flow and pay for liquidity. But order flow is not an edge.

When people in these threads talk about an adge they mean a system or startegy of some kind, mechanical or discretionary, that can produce consistent returns in the medium to longer term.

Without hijacking the thread, order flow is absolutely valuable information and the equivalent of an 'edge'. I also have seen that first hand and if you have not, no amount of convincing will persuade you. I don't think Taowave needs defending, because he has obviously seen it firsthand, but its real. Look at it this way - if you're trading LME metals and all of a sudden very producer in the world keeps taking your heavily shaded offer, perhaps you might want to reconsider your structural short? That's valuable information where your market makers influence your prop desk.

The edge with system trading is: avoiding overoptimization with robustness, leading expected trades either with experience or math, and managing your data set & understanding how the mathematics of the function you are using will in fact affect your p&l if the market begins to trade in a manner you did not anticipate.

Thanks for the lead - I'll perhaps take a month to play around with it once I am less busy. Then again, hopefully it doesn't take a month to run my dataset...

 

[intradaybill]

Quote from drsteph:

Without hijacking the thread, order flow is absolutely valuable information and the equivalent of an 'edge'. I also have seen that first hand and if you have not, no amount of convincing will persuade you. I don't think Taowave needs defending, because he has obviously seen it firsthand, but its real. Look at it this way - if you're trading LME metals and all of a sudden very producer in the world keeps taking your heavily shaded offer, perhaps you might want to reconsider your structural short? That's valuable information where your market makers influence your prop desk.

The edge with system trading is: avoiding overoptimization with robustness, leading expected trades either with experience or math, and managing your data set & understanding how the mathematics of the function you are using will in fact affect your p&l if the market begins to trade in a manner you did not anticipate.

Thanks for the lead - I'll perhaps take a month to play around with it once I am less busy. Then again, hopefully it doesn't take a month to run my dataset...

Can a retail LME trader know who is on the other side of the trade for his true motives?

Can a retail LME trader ever know whether the commercial is a bluffer or not?

Do you remmber what happened with Copper trading years ago? An Asian commercial trader was bluffing taking every single offer having already accumulated a huge long position. When retail traders starting bidding he unloaded (pump & dump) and everyone scrambled to get out like crazy.

I do not believe order flow can provide an edge unless you are able to position yourself in front of a huge order, This is mostly illegal practice if one is a market maker.

Maybe you may want to reconsider your views about this. I agree completely with what you said about system trading. Well said!