The usual question: how is it possible?

Discussion in 'Automated Trading' started by travis, Jul 18, 2009.

  1. travis

    travis

    As my automated trading keeps on producing money, the same question keeps on popping up in my mind: how can it be possible? How can I, from home, with my very limited means, limited knowledge, limited capital, make money, pretty consistently, and without doing anything?

    I am sure there are plenty of people here who are doing the same thing, and there must be some of them who have asked themselves the same question.

    I have worked at it for 10 years. During all these years, despite what others around me were saying, I thought I would ultimately make it and find a way to make money trading. Yet now that it's happening I still wonder, often - how can it be possible?

    What's the answer? Tell me.
     
  2. gono

    gono

    travis you are in extreme minority

    there are only about 20 guys like you on ET out of thousand or so

    you know something

    don't be coy, you know something

    you know something that most others don't


    now don't be a fool and spill the beans to the unworthy
     
  3. edbar

    edbar

    You're successful because you worked at it for years and refused to give up because you knew you could do it.

    You could give away a strategy / system that returns 10% a month and most people will look at the rules in the strategy, criticize the things that go against their "better beliefs", and throw the whole thing away on the first down day.

    For instance, if the said strategy bought small lots of stock to start and added shares to a losing position (when the conditions were right), many would disable the adding capability "because they NEVER add to a losing position", and cripple the 10%/month strategy.

    The fact is, the only way most people will ever make anything in the stock market is to buy mutual funds and it then those funds just happen to go up. Sad but true!

    Ed
     
  4. Amen Bro. Automation.

    You and I have been inundated with stats which say it is impossible to succeed as a trader, yet most of the people who quote those stats are (guaranteed) discretionary traders.

    Once you take emotions out of the game, it's all math. Well, for the most part, anyway.

    Welcome. But considering the current administration, don't assume it will last. It probably will, but don't assume it.
     
  5. don't know the answer. Because in my case, I failed (but only tried hard for 2-3 years) with programming such a system (IB, API, C+).

    My "systems" only worked for a period of time, then giving it all back...

    Now I am back to what I am good in, discretionary trading...
    I still think a brain is better in weighting all kind of informations but you have to live with all its failures.

    But the answer may be, that you tried very hard and maybe your skills are better than average. In the end, the people you are competing at are sitting at banks etc. but are also only humans and in most cases quite dump...
     
  6. travis

    travis

    You see, gono, I'm part of "small minority" in general, but maybe even part of a "majority" here, in this section of Elite Trader forums.

    Edbar says "the 10%/month strategy". That's exactly what I have. At a point, after 5 years of tests on TradeStation, I realized that I couldn't build a 100% a month strategy which wasn't over-optimised, so I started building a lot of 10%-a-month strategies.

    This strategy of adding to losers sounds very reasonable to me. I traded a bit on the paper trading account of TWS, where they give you 1 million, and I realized that if you add to losing positions, doubling up every once in a while (e.g.: once every 3 hours), you can't lose in the span of 24 hours. There is no market that goes up/down for 24 straight hours.

    With 1 million you will have enough margin for 1+2+4...255 futures. You randomly open ANY position of 1 contract in ANY market, and then:

    - After 3 hours: if it's winning, you close it and take the money. If it's losing, you add 2 contracts (but 1 would be enough actually, because this is not like the roulette where you've lost your last bet money for good).
    - After 6 hours: if the overall position of 3 contracts is winning, you close it. If it's losing, you add 4 more contracts. And so on.

    It seems impossible to lose. Do you agree, Edbar? Then if you don't pick your initial position randomly, but pick a LONG trade on an oversold market (better if you're in a "trading range" period and not a "trend" period), then you often won't even have to double up and will be making money after the first 3 hours. But I think the same strategy could be played without doubling up (just adding 1 contract every 3 hours) and it would still make money but be safer.

    So what does this mean? It means that if you have 1 million dollars you can make money every day. But I don't have a million dollars and even this strategy is too hard for me to test (doubling up, etc.). For me right now it would even be hard to automate it.

    Jnbadger says "Amen Bro. Automation" and not to assume things will go as they have. Yeah, I understand and I agree.

    Concerning the power of automation, I could use the example above to show how that strategy could go wrong if implemented by a human rather than being automated.

    I already tried implementing it actually, when I got crazy this past year. I got crazy because I overleveraged, and yes I had +100% months, but then also had -50% months, during which I resumed my discretionary trading (trying to make up for losses) and lost everything because of it. What and why? I mentioned the 3 hours to wait. Well, I didn't even wait the 3 hours. I waited something like 15 minutes, market went against me, added 1 contract, went against me for another hour, added another contract, went against me, had no more margin, still went against me, lost everything. That happened because, being human, each time I thought "this is THE bottom" and didn't think "one contract every 3 hours" or "wait, I could be wrong".

    But actually, knowing the trend cycles, I would say a better system would be to apply everything like above (the automated strategy not the reckless discretionary implementation of it), but wait 6 hours instead of 3. That way you can really double up (IF you have 1 million, and STILL I didn't test it). I would say the best market to be used is a ranging market like the EUR. Not good on OIL, BOND futures, because they tend to go straight up and down much more than the EUR.

    And yes, back to what jnbadger was saying, I, too, was "inundated with stats which say it is impossible to succeed as a trader", but - even worse than that - I was inundated by relatives and friends, non-traders, telling me "if it was possible everyone would do it". I always thought "how can it not be possible? it seems so easy". Then it wasn't as easy, but now I am saying "how can it be possible?" and even "how can it be legal?". How long will it last? I am feeling a constant anxiety, too, besides the curiosity.

    How do you react to making money without working? Do you feel guilty? (I mean, of course you worked non-stop for years on your systems, but now you're making money without working). Other thoughts or psychological aspects you wish to share?

    P.S.:
    I just read now what Topsurfi wrote, so I am editing my post. Sometimes I think that programmers (he mentions using C+) have more tools, but also more distractions. I taught myself some VBA, and I was forced to keep things very simple and basic. But programmers are going to be so ambitious with the automated platform they're creating, that may lose focus of the trading ideas, busy as they are in programming the fastest and most efficient platform. Maybe they try to make everything faster, whereas the key is be slow. I was forced to come up with slow and infrequent strategies, by commissions, platform (excel), poor programming skills, distance from the exchange. Also, yes, as you say, I am competing with banks and dumb people. Put the banks, too, with the dumb people. Because the fact is the CEO may be ignorant about trading, and may hire bright Harvard graduates who know nothing about trading, either.
     
  7. edbar

    edbar

    Travis,

    I must say I do not agree with arbituarily adding to positions.
    When you open an initial position it is because you expect the stock to do something (go up or down), but if you (or anyone else) knew 100% for sure what a stock was going to do, you would be richer than Bill Gates.
    So, just in case your are wrong, you only open a small position, say 100 shares, instead of 1000.

    So, if your position happens to go the wrong way (and it will many times. Welcome to the real world), then you have "Add To Position Rules" that that state that the stock must go done some amount (say ATR X 2) and the host of other conditions are also all pointing in the right direction, then add another 100 shares. It could take minutes, hours, days, or weeks.

    The fact is, I am not in control of the stock market and I don't need my CoolTrade robotic stock traders gambling. Let the market come to you!!
    We may go into a 5-9 day downturn (like we did a short while ago).
    Then, as the stock rebounds and each portion of the position becomes profitable (LIFO) you take profits, selling them off in reverse order.

    Trading fees AT IB-TWS are only $1 a trade ($2 round trip). So with trading fees not an issue and only trading in 100 share lots, you don't need a million$. Just set your ATS to buy in lot sizes of 5% of your buying power, so you can do 20 trades.

    That strategy is impossible to do manually, but the CoolTrade system handles it beautifully.

    However, back to what this thread is about. If you hand that "winning" strategy to someone, and they sell the first time the stock drops, so instead of waiting for the up day (after 4 straight down day) to add to the position, he closes everything at a loss.

    Regarding not working. After 10 years of software developement to create CoolTrade, please don't tell me I'm not working while my 6 live automated traders are making money. That would be the understatement of the century. However, I do give away this strategy and many more to my subscribers and they are somewhat getting a free ride. But the stock market is so full of pits and traps with thousands of professional traders and institutional computer competing with the unsuspecting public, it's only fair that they be able to compete on a level playing field. Dumping money into mutual funds and watching it drop 50% in a year, while the fund managers, "who should have been working" were asleep at the wheel. Do they they feel guilty "not working"?

    Cheers!

    Ed
     
  8. travis

    travis

    Thanks for your feedback. I don't have enough skills to answer all your remarks, but I agree with you on almost everything you said. Some quick thoughts about your post, in random order:

    My example of going randomly long or short on any stock at any time was an extreme example, but it was supposed to give the idea that if you have enough capital, you can't lose.

    Other thought. Shouldn't the purpose be not to work? Why are you still working all day long if you have figured out how to make money without working? I think I asked you this one, in another thread. You must be addicted to work, right? What's the point of having done all you've done, if now you don't use the money to stop working? I would be working no more than 15 minutes a day, to keep on making money. And, if you have enough, not even trade anymore. My first purpose for making money was to stop working.

    The fund managers. Interesting point. I think if I have a hope of making money with my little strategies it's not because the little guys ("day traders") don't know what they are doing (they don't move much money), but also the "big guys", the fund managers, do not. Once again, I am guessing they got hired by CEOs (who don't know anything about trading), because of their degrees and they'll never learn anything about trading, because they're starting too big, don't have time, have too many restrictions, are not inclined to learning about it... for the majority of cases of course. And I am guessing they work. They are always at meetings.
     
  9. edbar

    edbar

    First, it is hard for me to talk about stock trading strategies without mentioning the thing I spent 9 years developing to be able to execute the kind of strategies that work. Institutions have been using automated traders for years and it doesn't appear to offend anyone. I don't know what offends me more; the fact that they are using their automated traders to compete in the stock market, or the fact that no on cares!

    The mere mention of an automated trading product on an "automated trading" discussion board appears to offend people.

    The fact is, I could not trade the stock market manually. My strategies are way to detailed to be making all of those calculations and price adjustments manually.

    The answer to your specific question about working is I retired in 1995 (and I won't say from where because that may offend people even more and I don't want to waste time bickering), and spent 5 years in 100% retired mode, and it's not all that it is cracked up to be. I learned why some people die within a few years of retiring. Now I do my own thing, and I love it.

    Bill Gates had over 50 Billion dollars and worked 15 years longer than I did, and now that he is retired, he is still doing more, as is Ted Turner, as is Warren Buffett. When I have Billions of dollars, then ask my why I am still working.

    As I recall, your original post said that you have conquered the markets. Congratulations! People who are not where you are (in relation to the stock market) will not comprehend what it took for you to get there, or the effort that it takes. And when you tell them how, they will find holes. ha. ha.

    Good Luck!

    Ed
     
  10. travis

    travis

    Thanks, Ed. Good luck to you, too.

    "People will not comprehend...". That's right, I agree, and that's why I speak freely, and I am not afraid of giving away what I learned with great efforts/time. I am not afraid of giving away my secrets. Unless someone has been through everything, it will be impossible to understand what I am doing. And if they understand, it means they've been through it, and made a lot of efforts, so it's fair that they understand it.

    I am sorry you read that part about the "advertising". I took it out a few minutes later. I thought it wasn't nice to have written it, and most of all a useless remark to make.

    About retiring, I think you gave me the same answer last time. Sorry to have asked you again. I forgot about it, because your answer didn't make sense to me (I would say the same thing to Bill Gates - you both remind me of the word "workaholic"). I feel that doing nothing is great. Why not learn to play piano? Your work on systems will never end. Improvements can always be made. More money can always be made.

    "Conquered the markets"? I would say that's a little too much. In this past year, I have lost everything twice. In the past few months, it's been working though. For me the "past few months" are what matters, because I am always making great improvements. Not because I'm exaggerating, but because it's easy to improve when you started from zero. I had no financial or programming skills (I wasted my time with a Political Science degree) and did almost everything by myself, so that I really hadn't accomplished very much until recently. That for me is a success and that's why I am so excited. But I wouldn't call it "conquering the markets". I'd never want to say something like that, because feeling that way would set me up for disaster. I am reckless enough as it is.
     
    #10     Jul 19, 2009