Can you clarify what you would suggest is a lengthy loss? Many hft traders don't have losing weeks. Many successful traders are the same. For day systems would you say that 80% on the monthly profitable is good? Straight out of the box, just applying the same rules daily?
I second that statement completely. I've been trading automated for several years and just Friday's last trading hour caused me a lot of stress watching a profitable week turn into a losing one and killing the last three profitable weeks as well (more here) http://www.elitetrader.com/vb/showthread.php?s=&threadid=213183&perpage=6&pagenumber=10 I think there's two core problems that traders have. The first one is that most (if not all) traders look at their performance in a very short term timeframe. e.g. if you'd look at monthly results rather than weekly/daily your stress level would get reduced significantly (especially in my case), yet because I do daily M2market accounting and have to adjust the buying power of each automated strategy I'm very well aware how well each strategy does in the current environment always tempted to adjust it (and even if you don't actually turn the dials, it still causes stress). There's more on this topic in this book "Fooled by Randomness" http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Markets/dp/1587990717 The second issue is that most traders rather want to learn to fish than go to the fish market and get their own free fish. In my case it's because I don't know where the fish come from or how much longer they'll be there. Otherwise everyone would just jump on a system like http://collective2.com/cgi-perl/system25860974# This system made a killing the last three years, has a great equity curve, sharp ratio, little draw down .... but yet it doesn't have 1000s of traders following it, even though it rarely has losing month. I know in my case I can't overcome either obstacle, so I think a mechanical system can eliminate some stress because you won't question your entries/exits as much (especially if you've developed the system and understand the rationale), but trading in general will still be a stressful activity, regardless if it's discretionary or mechanical my 2 cents
you can work closely with ddav, he has a working automated mechanical trading system and needed a buddy to work with. http://www.elitetrader.com/vb/showthread.php?threadid=214316
The question of stress when trading raises a very interesting aspect of being an independent player in markets. The short answer is also a simple one: devise or adopt a methodology that is very reliable in triggering moves which are profitable AND which also, if any loss does begin to arise, shuts your position. From such a successful methodology, stress will reduce and die, as a factor. Lets assume daytrading in a futures market (eg CL). So then, how does such a methodology work? What happens is that every signal (trigger) sooner or later is followed by a counter-signal. In other words a buy signal is followed by a sell signal. You don't need a stoploss. If the original signal does not produce a gain or not a very big gain then the counter-signal closes/reverses your position with a small loss. Normally, your signals are reliable enough to produce gains before the counter-signal occurs. But lets look at stress differently - as a human component. Women can cry or even be hysterical occasionally; men cannot (normally). Emotional outbursts are about expressing stress. If you are stress prone, 2 things: either forget altogether learning to trade or instead learn to overcome stress (and eliminate it). Now stress, I suspect is a sercret killer of many new amateur traders once they try live trading . Who wants to admit that he or she is a weak nobody in the thrall of constant stress - and its derivatives: panic, rash impulse, turmoil, fear, catatonia, etc? And at the other end of the spectrum there are those with a low stress calibration. There is where a suitable trading temperament is so important for success (namely a calm, smooth, unstressed disposition when playing).
Many thanks for the input. Here is why I feel it can eliminate the stress, if done right. 1. Most of the emotional stress comes from trying to make decision when millions of dollars are on the line, in a split second. I know it because I have traded well over half a billion doing it over three years (186-1988). I had to stop trading when I was asked to quit by Fidelity, that we were trading too large an account and too often. I tried for two years paying two full time programers to design the sys to prevent emotional stress. They both said it can't be done. One of them was my son, a very smart one at that, he is SVP now at Google. 2. Stress does not come from loosing money, I lost 33% of capital in the first year, not because I made stupid mistake but because Fidelity had two very similar fund names. They sold the wrong one, as a result I had a loss. Because I knew what I was doing, I recovered from that loss with in a weak. And at the same time learned the power of margin, only if you undersigned it works both ways. 3. I agree with other people that testing your system thoroughly does give you the confidence to move forward even during losses, as they will show up in your back testing, as a that is part of any game. You never win every trade, you have to know going in. 4. Stress comes form our expectations not met. I am not looking to get rich from trading. I am financially independent and not depending on this income. I only want to do better than 0.1%/year, which is what the banks are paying today. 5. I believe we need to use today's computing power (when I started a 10 meg hard drive computer was going for 6 thousand) that is available for us to diversify. For example, I only want to invest no more than 2% in any given trade. The only way to have 50 trades going on in any given time is via computerized trading. 6. I absolutely agree with one of the commentaries, that we need to have several strategies. I plan to have 33% in day trading, 33% in 2-5 days and another 33% in 2-5 weeks. No holding strategies for me. 7 Finally, I agree that we have to have short and long strategies and not worry about where the market is going, because it is going to go where ever it wants to. Now PLEASE, would some one help me with the logistics, as to how to get started. I know many of you are out there with lots of great ideas. I am not here to steal any one's idea but just the mechanics of building a mechanical trading sys. Many thanks for those who have taken the time to share their ideas, this as important an issue for me as for most. Regards, Paul
Bad choice of words on my part as it 'can' be useful in the right place, at the right time. A volatile stock can easily move several % points in a day.
TradeStation is mechanical or try TraderStudio. Both can work with swing / position trading. My stuff is intraday only and I have no interest in sharing the mechanics that took thousands of dollars. 10 times what my initial budget was but is 1000 times better than I had ever imagined...because its capable of doing what I wanted to and much more than I had ever dreamed of. This came with patience and determination. If someone gives you something, you aren't likely to value it. If you really want to find the answer, pay for it or do it on your own...that's what I had to do.
Thanks trhudson, I know you mean well, as are so many others with different opinions. I think you are misunderstanding my need for asking for guidance, in that I am not asking any one to build a sys for me. Only that those who are experienced in making automation possible as the direction where the future lies for this technology. Like Excel/easy language, C+ platform like Multcharts etc. In other words the best tools going forward for some one who is starting from scratch. I hope it clears up a bit. Thanks , all of you who have some thing valuable to share here. Please note that no one is looking to steal nor does any one expect the secrets, which I grant take a lot of sweat to achieve. Lots of good luck in trading. Paul
I started with this book. While it was a basis, it was another few months after I read it before I got anything started. http://www.amazon.com/Building-Automated-Trading-Systems-Introduction/dp/0750682515 It's just like any other successful venture, most people that get to the finish line would tell you that it was a much, much tougher task than they had ever imagined. Many would also say that they wouldn't trade their experience for the world, but would they do it from the start if they knew the road ahead...many would really have to think about that. I would definitely do it as it has turned out that I have learned a lot and what I can do, can't be done with most commercially available platforms. What I have is good for me, but that's basically what trading is all about, finding what works for you.
In my experience it's not having an automated or mechanical system that reduces stress, it's having a method you believe in. This is what allows you to take the losing streaks without second guessing yourself. It also means you extract the most from the winners. To develop belief in a system you have to do the research. Paper trading or backtesting, whatever is appropriate. There are good ideas on bulletin boards like this one but they alone won't make you a trader.