How much capital does your automated system trade?

moehonker · Apr 15, 2009

Quote from RoughTrader:

I have created a thread to demonstrate this very thing. I created a small account ($75,000 USD), and started trading with 1 contract to illustrate the progression of my ATS. You might want to take a look before you jump to conclusions that automated trading is not possible.

rt
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Thanks RT, I need some inspiration here. I believe you mean 'profitable' auto trading is possible. Really thought I was onto something to earn a living... will look for your thread for more inspiration/guidance.

moehonker · Apr 15, 2009

Quote from 5of7:

I strongly disagree as well. There are indeed strategies that are profitable.

Of course each equity-curve profile will require differing money-management to absorb drawdowns for each profile.

But there ARE profitable autotrading strategies. We live and die by a whole slew of them everyday.

Trader 5of7 @ TheCollectiveFX.com
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Thanks to you too 5of7. I trade stocks only.. but those horrible backtesting results has thrown me for a loop. Will look for more threads regarding this..

AC3 · Apr 15, 2009

I trade futures with an ATS and I have spent months upon months doing walk forward optimizations and tests on ideas before committing a single dollar to the venture. Sometimes what looks like a sure fire winner when tested backward plays out horribly and afterward you do the head smack and think "how could I have missed that" etc

Anyone who doesn't check their strategy under "real world" situations is crazy .... in my view there is no substitute for it ....

Just for the record I trade Eurodollar contracts.

5of7 · Apr 15, 2009

I agree, all new strats are (and should be) forward live tested before they get fed more money.

Trader 5of7 @ TheCollectiveFX.com

R1234 · Apr 16, 2009

Quote from 5of7:

A third approach not mentioned is Strategy Filtering. This is essentially watching closely the performance of your strategy, and plotting the equity curve. If the strategy is making money, you continue to let it trade with live money. If it begins to perform badly, you "switch it off" and put it into simulation mode only until it begins performing well again.

Trader 5of7 @ TheCollectiveFX.com
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How do you measure the system's performance to decide when to turn it off/on?

Some sort of moving average on the equity curve? Rolling Sharpe Ratio? Number of winning trades calcuation?

I've tried some of these things with mixed results. Maybe I'm using too short or too long of a lookback in my moving average of the equity curve.

travis · Apr 17, 2009

I already asked a similar question and he replied to it as follows (see quote below). His reply sounds reasonable but also very complicated and it seems like a lot of work in a completely new and challenging direction, and I don't want to get started on this unless it is really necessary and unless I am positive that it will work. Since "Strategy Filtering" is not recommended by everyone, for now I'll stick to the whole of my strategy and to its equity line, with its ups and downs. Besides, I feel that the first point is to make sure you only use strategies that do not show clear ups and downs (maybe by filtering its signals, based on range or other parameters). I mean, I already had to work on it for years as it is,. with just 2 or 3 parameters in my strategies. If I introduce the concept of strategy filtering, the work will double and I will have to work on it for another 2 years.

Quote from 5of7:

There are lots of ways to filter a strategy (when it is good, when it is bad), google it and numerous methods and ways of evaluating strategy character will come up along with the needed math in terms of dependence.

But to answer you, yes, the equity curve of the underlying strategy is indicative of it's near term performance, especially with a strategy with a high dependence.

Here's a simple way to look at it. First separate your strategies as long strategies and short strategies. Now take the long component of your strategy and plot it. Clearly it will do better when the underlying market is in an uptrend. If you mix long and short it gets very messy and is nearly impossible to determine switch points.

Something else to consider is that a strategy that trades very infrequently (once per week) will need many, many weeks of consistent market behavior to give you good points to switch, and long periods of good performance.

Plus you need the underlying market to go into a consistent trend, and hold.

So the higher the frequency of your strategy, the more granularity you have to switch it on and off, and the closer your strategy performance will be an indication to the current market conditions.

Now, we don't even care if it's a winning strategy or not. The only thing we care about is that it has VERY CLEAR times of doing good, and VERY CLEAR times of doing poorly. We want it to die a death when conditions aren't right. This way we can more easily tell when to turn it off.

Here's an example to play with, try a long only moving average crossover and use very small stops, and very large targets.

Unless that strategy finds itself a clean, clear uptrend, it's going to die, and clearly die. But when it locks into a trend, it's going to gobble every bit of profit it can.

That subsequent equity curve is going to go down, down, down until it finds an uptrend, then it will shoot up. Clear switch points.

Have fun, it's my most favorite thing in the world, all this stuff. I like to think we have a collection of the best market direction indicators (our strategies) : - )

Trader 5of7 @ TheCollectiveFX.com
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travis · Apr 21, 2009

I'm just adding this link to remind myself that this poll is paired with this other one:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=161203

travis · May 11, 2009

up

BrooksRimes · Jul 30, 2010

Grail is very much still around and was acquired by Tradestation in June 2010.

http://www.thegrailsystem.com/

Quote from AC3:

Thanks for that ..... What are your thoughts on Genetic Optimization and Walk Forward Optimizers ... was trolling through the TS Forums and came across an old one on "The Grail" software which from the posts seems to have gone out of business. Do you use them and if so what particular product do you find most useful with the TS platform. Apprec
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How much capital does your automated system trade?

How much capital does your automated system trade?

>0 to <=10,000

>$10,000 to <=$50,000

>$50,000 to <=$100,000

>$100,000 to <=$250,000

>$250,000 to <=$1,000,000

>$1,000,000

moehonker

moehonker

AC3

5of7

R1234

travis

travis

travis

BrooksRimes