My auto trading system generate hundreds of trades a day, but...

Discussion in 'Automated Trading' started by tzlf, Mar 24, 2007.

  1. That's exactly what i mean.
    The difficulty to have a reliable probability grows exponentially with the length of time.
    Being right for 1 second is easy, being right for 1 minute is a little more difficult, being right for 1 hour is difficult and even impossible for many traders.
    Because of that reason scalpers scalp. It is out of necessity.
    #21     Mar 27, 2007
  2. virgin


    Because of that reason the way to go for traders is the shorter time frame, it is not necessity, it's opportunity

    I see the market as the weather, the shorter the time frame, the more reliable the prediction.

    I have started with time frames of weeks, scaled down to days, and now minutes, I never made more points.

    How many moves of 100 points in the S&P you can catch in a year ?
    How many moves of 2 points in the S&P you can catch in a year ?

    Stress ? less because of reduced uncertainty

    Higher chance of profit on weekly,monthly basis(consistency)due to the increased frequency and profit factor going up when decreasing the average trade duration( my case)

    Scalping is driving a formule 1 , swinging driving a BMW, investing driving a truck (Soros & co)

    The price you pay is screen time and requirement of constant concentration.

    Some like driving a formule1,some a BMW,few a truck :p To each his own
    #22     Mar 27, 2007
  3. virgin


    Good point, or trade the same strategy on non-correlated instruments.
    #23     Mar 27, 2007
  4. Some people cannot make the distinction between reality and dreams.

    The hypothetical calculation in the word doc from this link has been copied and I added some calculations to proof the stupidity of it.

    1. I added how many points the simulation would give on 240 trading days a year.
    2. I multiplied the net profit for the three days by 80 to get the yearly profit per contract.
    3. I than calculated the number of contracts that was needed do make 12 million $ a year.
    4. I finally calculated the return based on the normal margins as required by the exchange.
    Returns varies between 10000 (ten thousand) and 54000 ( fifty four thousand) percent a year.
    Can someone show me a scalper that makes the worst possible return in the simulation?

    Hypothetical calculations have no value unless they are based on reality.
    If I could turn water into gold I would be the richest man in the world. But the only problem is that theoretically I’m right, but in reality I’m wrong.

    Tradebot has to turn around 50-100 million stocks to make 50K in 1 day.
    One of their traders, Vos, had to turn around millions of Microsoft stocks to make 5K.
    Depending on the size of my position ( which will be massively smaller than Tradebots positions) I make easily 5K in a day with 1 or 2 trades.

    You should trade according to your capacities. And within your capacities you should look for the best system you can manage. This doesn’t mean that the system that you are trading is the best system there is; it is hopefully for you the best system YOU can manage.
    #24     Mar 27, 2007
  5. virgin


    Geez, you simply don't get it !

    The hypothetical calculation assumes a perfect machine that gets all the max possible points, of course we know that nobody can achieve that.
    Let's say your output is 1 %, then divide those numbers by 100 to get a realistic number.
    How much points you make on average per day with how many trades on average ?

    The value of those hypothetical calculations and the point of that whole thread is that by trading on a smaller time frame, you can make more points , not only hypothetical, but also in reality (what I experienced myself)

    I worked at a prop house and the numbers there also proved an inverse correlation between the average trade duration and the number of points made : the smaller the average trade duration, the higher the number of points captured, some traders even got sacked because they repeatedly stayed too long in trades.

    P.S. For dreaming you have to be with Jack Hershey who claims to never have a loss and capture 3 times the daily range :p
    #25     Mar 27, 2007
  6. Well if you say it's about points, then why do you give a hypothetical useless example instead of points?

    I trade intraday and take net more than 50% of the daily moves. Included losing trades, slippage, commissions. Combined with the leverage that i can use 1 point a day gives 5% net return on the capital invested. This month (starting from march 8) my average per day is 5.95 points per trade; i did 20 trades so far.

    How much do scalpers make?
    #26     Mar 27, 2007
  7. So, accounting for an optimistic spread of 2 pips, and the average of 200 trades a day, the system loses 240 pips every day: (2 - 0.8) * 200 = 240.

    Is that right?
    #27     Mar 27, 2007
  8. spike500, if you make 5.95 points a day (assuming a 5% return per point) just for a month with compounding, you'll multiply your money 182 times by the end of the month - without compounding, 7 times. No one, scalper or non-scalper, is making this return.

    nonlinear5, optimistic spread of 2 pips?

    What's so optimistic about that? :)

    First of all, only a moron or a masochist will scalp on a 2-pip spread. Since on institutional liquidity, the spread on EURUSD is usually 1 pip or less, I'm assuming you're referring to a retail, fixed spread broker. Those are fine for swing traders, but a joke for scalpers.

    Like a carpenter needs a hammer to succeed as a carpenter, a scalper needs the correct tools to succeed as well. Don't try giving a carpenter a plastic toy hammer.
    #28     Mar 27, 2007
  9. mujoh


    #29     Mar 27, 2007
  10. This thread is exactly what I needed.

    Summer '06, due to the intraday volatility drought, I changed my style from intraday swing to scalps. Since then I've been looking for the doorway back. BTW; I trade Index futs for purposes of this topic.

    This thread has me asking Why?

    1) IMO, Scalping is frickin fun!. Intraday swing is boring (especially in no volatility consolidation periods)

    2) Scalping gives (almost) immediate results, right or wrong. Swing, for me, comes with angst. In particular, I hate holding after an initial move without follow-through.

    3) Not claiming to be Jack or anything, scalping allows for 100% and more of the intraday range to be banked. Swing, the best possible is 100%. But only liars pick (and execute) the toptick AND bottomtick.

    4) The cost of executing business, at least in my case, without having a seat, is under control. 1 tick RT to the good makes money. Do I care if my broker makes a profit! Really, I've never had issue with my negotiated execution costs.

    Thanks to danger, onelot and virgin. Im stepping up my scalp game.

    Tiddlywinks... get em in the cup!
    Osorico :)
    #30     Mar 27, 2007