Hello all, I've been manually trading stocks using daily/weekly bars for some years now and am looking into creating a blackbox trading system for some low frequency intraday trading (perhaps up to 10 trades in a day for a given instrument). I'm not trying to compete with HFT and would like to leave a generous margin for latency and slippage. I would like to take a very scientific approach to this as I research and come up with strategies to test. I have some questions: 1) What is the ideal data resolution for developing a system like this? Do I really need tick data or is minute data enough? What are the pros/cons of one over the other? 2) Based on (1) above, what is a reasonably priced historical data source and how many years of historical data is generally enough to thoroughly back-test a strategy on this scale? 3) Should I stick with stocks or switch to futures (or both)? I would think futures would be easier to manage for tax purposes. Thank you!
IMO, 10 trades / day in a single instrument is *NOT* low frequency, especially if you are talking of a single setup - but if you are thinking about multiple setups, then your first step should be to consider each setup on its individual merits, not mix them in a single strategy. 1) ideal resolution - there is no such thing, both have their pros & cons. It ultimately depends on what resolution you need to model the market. I am using primarily tick-data, even though my systems are (intraday) swing trading systems (up to a couple trades per day, on average). This allows me to be flexible in my definition of the patterns I am interested in (by flexible, I mean they don't have to be aligned with 1min bar boundaries). But many successful traders just use minute-charts - to each his own 2) Use TickData - they are simply the best, at least for retail traders. For stock-index futures, I would suggest 10 years, for commodities futures, you might want to check when a specific product started trading electronically 24/7, the data before that doesn't have accurate volume information, and 1min data is the best you'll get from pit-sessions. Several thousand trades in backtesting over 10 years (on ONE market) will give you a reasonable starting point. Note that if your strategy averages 1 trade per day, you'll have 2500 trades in 10 years, so that level shouldn't be difficult to reach for intraday trading. 3) Given all the crap with internalization / resell of order-flow / sub-pennying & darkpools / HFT, I doubt the stock market is a fair market these days, and for myself I stay away from it and just trade futures. Good luck in this endeavour, this is much more difficult that you can ever guess from the outside. I think the next poster should be EMG
You are being trolled... http://www.elitetrader.com/vb/showthread.php?threadid=262004 http://www.elitetrader.com/vb/showthread.php?s=&threadid=261981
Thanks for all the research. Do you have a working hypothesis why anyone will go about creating new ids on any anonymous forums and asking legitimate looking questions? I mean what can such a person gain from such an exercise? Why do it in the first place? What kind of psychological reason can lead someone down this path? Any ideas...
I just want to state for the record--I do not know what you're getting at... And to those of you that responded--thank you.