Poll: Programming skills helpful to trading ?

Discussion in 'Professional Trading' started by ilcaa, Jul 7, 2005.

  1. That's an astute distinction, and maybe I can illustrate with an example using the past two trading days. For the record, I run an overnight system designed solely for ETFs and trade the same ETFs intraday with discretion. The system is a hybrid, combining volatility breakout with mean reversion using Crabel's concepts of range, so it switches back and forth depending upon the expected range.

    So, starting with the system, it expected a narrow range day yesterday, so any breakouts were to be faded. Around 2 pm, a breakout was triggered, and the system faded "sold" the breakout as price traversed back below the high of the previously defined range. Since the system had no other signals that day, it held overnight and carried the gap (pure luck but factored into any overnight system). Now, you may be thinking that the system was smart enough to stop-and-reverse on the gap down this morning. Nope -- because historically the majority of large gaps tend to establish a new trend in the gap's direction for at least 3-4 days. The system went long much later only after clearing some key resistance. Thus, although the system made money the past two days, its statistical profile dictated that the gap not be covered on the open, and profit was not maximized.

    Now, take the human -- me. QQQQ had been in a prolonged, shallow downtrend near its 50-day MA, but showing good relative strength. This morning at 6 am EST, the NQ's are trading down 30. We're getting the EIA report at 10:30, the employment report tomorrow. What are you going to do if your experience screams go long? Cover of course (half-position), and then watch the price action for some recovery or for an ORB to re-establish a net short position.

    Which brings us to system development. Yes, anything can be programmed... anything. But when you're coding special trading cases, you're curve-fitting, and there's no way to establish the robustness of a system with so many degrees of freedom. I completely believe in adaptive systems, but the rules must be relatively simple and work on a walk-forward basis. One way to develop a robust "all-in" system is to include all of the possible signals that you think make sense, but then eliminate those that prove to be superfluous in real-time (reductio ad absurdum). The rule is you can delete code, but rarely can you add code.

    I've come to believe that one can develop superb trading skills by running an automated system AND trading with discretion. There's no substitute for watching the market and the patterns develop in real-time. Once your real-time pattern recognition fuses with all those charts you've studied, you're on the path, and then you can use your system framework to guide you intraday. Sometimes the system is better, sometimes you're better. Typically, the discretionary trader blows the doors off the systems trader on NR days and vice versa for WR days.
     
    #11     Jul 7, 2005
  2. You ever wonder why some of tghe biggest hedge funds have ham radio licenses?
     
    #12     Jul 7, 2005
  3. nitro

    nitro

    Y.

    nitro
     
    #13     Jul 7, 2005
  4. intresting though how Big Blue IBM beat the world chess champion...human emotions under stressful situations is why most could be traders fail. yes, no, maybe so.
     
    #14     Jul 8, 2005
  5. Definitely helps and always better than an abacus....

    But when you spend more time trying to construct the best abstract objects ever rather than using your brains to have new ideas, you're perhaps on the wrong way.
     
    #15     Jul 8, 2005
  6. DTM

    DTM

    Totally a discretionary trader so no, don't have use for programming hence my ignorance about programming. In saying that, I would like to know more about programming. It would be nice not to be watching the screen all day long.

    I like volatility trading as thats how I can best maximise profits. I don't think you can programme any system to trade volatility.
     
    #16     Jul 9, 2005
  7. I would imagine that regardless of how you trade, some benefit could be gained from having even a basic grasp of programming.

    The only negative being that your thinking may shift in a more analytical way.

    If one is using 100% instinct, presumably they could still save time and therefore benefit from automating tasks such as reconciling P&L,etc.

    Conversely, if one were to use a trading-system of some kind, every element that could be automated via a computer system, would be of benefit.

    You can also take advantage of various Quant libs that are open-source and if nothing else, get a handle on the kind of losses you can expect and manage risk better...
     
    #17     Jul 21, 2005
  8. IBsoft

    IBsoft Interactive Brokers

    I think having some programming skills will help you regardless of whether or not you will directly put them to use in writing automated trading systems.

    The benefit comes in simplifying and focusing your thinking. i.e. in order to express an observation and/or trading rule in a computer language, you have to:
    - use a finite number of variables
    - define a concrete (preferably simple) rule that uses or connects them
    When doing so, our mind has to work on filtering out relevant from irrelevant, and facts from emotions.
     
    #18     Jul 21, 2005
  9. TGregg

    TGregg

    For me, it certainly is an essential part of the core set of skills I need. I have my own trading app, plus another that assists with logging. It's also useful for testing theories about the markets.
     
    #19     Jul 21, 2005
  10. ozzy

    ozzy

    Systems defenitely have an edge in my opinion. They are scalable and can access multiple markets simutaneously.

    There are also many other benefits in system design. My goal is transform from a discretionary trader to a full blown system designer. I have the EE background just need to acquire the knowledge/experience.

    ozzy
     
    #20     Jul 21, 2005