NYSE system trading

Discussion in 'Strategy Building' started by bungrider, Feb 14, 2003.

  1. Hi-

    Can someone spell out for me the considerations that arise when devising mechanical systems for listed (NYSE) stock trading, because I'm curious to know a little bit about the issues that arise when trading a market that is more prone to extreme slippage and intraday gaps in prices (versus system trading a linear market, such as the ES or a nasdaq stock).

    Obviously this only applies to system trader who trades smaller quantities of stock (less than 5,000sh)..

    Thanks in advance,
  2. Good morning,

    I am from Italy and have landed onto this nice forum
    Please, consider that I am a Tradestation User and I trade the Italian Stock Index Future (Fib) with a computerized intraday trading system. TS is a nice sw but can not do everything (for example can not test switching strategies among different securities).

    Lets assume that:

    - I had a basket of 50 stocks/indexes
    - I would like to test this strategy:

    Buy the 5 stocks/indices that:

    - are over their 25 days EMA and

    - whose 50 days EMA is upward sloping and

    - whose 21 days ROC is the highest among the 50
    stocks/indexes and

    - keep the position in each of the 5 selected securities
    until their ROC rankings remain among the first 10
    unlessa stop loss is executed and

    - if one security quits the selected portfolio, insert a new

    - back test this strategy and give the equity curve of this
    switching strategy

    Could I do that with Wealth Lab? Could I do with other programs?

    I have to be sure that I have explained the real meaning of my question. The reason is that I am looking for an alternative to TradeStation (which, in any case, is good for some specific works) and, in addition to the cost, a wrong choice about my next program would be a huge waste of time. While I am writing, just now TradeStation is working in real time for me with an intraday system which has a very good risk control. I do not need to follow the market every minute. But I would like to move also to daily trading with a different philosophy.

    With Trade Station I can size the position but I can not switch among different securities, selective the most promising. My interest is about monitoring simultaneously various (country and sector) ETFs to decide not only when buy one of them but WHICH ONE buy among the many available. Why? In statistics you call this principle "degrees of freedom", the more the better because you have more choices. Moreover, if you look at the charts of some real estate and gold ETFs, you understand that even in a bear market you can be long of something on condition that you monitor multiple uncorrelated markets.

    In 1998 I started an academical study on sector rotation strategies using Fidelity Select Sector Funds. I bought a US sw called Monocle II, I made a lot of analysis and at the end I printed a study on the Review of the Italian Financial Analysts (I am a member and editor of the quarterly magazine), now reprinted in a book (chapter freely available in Italian on your request). Monocle II was excellent for preliminary analysis but not for sophisticated strategies. It allowed the selection of the best funds on indicators based on relative strength (and related backtesting strategies) but did not allow multiple conditions (filters). So it could happen that it bought a fund in a bear trend just because it had bounced more strongly then others. The use of moving average as filters could have reduced this problems.

    Thanks for the reply,

  3. Bung, if your system is intraday and uses stops be warned that the specialists will pick them off at their earliest opportunity, usually during the midday doldrums. I saw it too frequently for it to be random so I quit using stops unless I had to be away from the screen for a while.

    If you need intraday stops investigate the various ways your broker handles stops. For example, IB has a couple of ways of handling stops, such as double bid, that might make your system more resistant to such stop-running.