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Systematic Futures Trading

Discussion in 'Trading Diaries and Journals' started by jjbinks, Oct 19, 2019.

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  1. jjbinks

    jjbinks

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    Hi All,

    So as some may now my experiment trading US stocks using a trend following system ended last week. I decided the efforts compared to trading ASX did not justify taking it to real trading.

    I am contemplating looking at developing and trading a futures system but keen to hear what experience others have had.

    In terms of my own experience trading futures.
    I have lost money trading futures in a discretionary way a few years ago. Despite this I still feel I will have a lot to learn about the intricacies of futures particularly if I want to build a system. I am doing reading to address this.

    In terms of practicalities:
    -I am thinking of trading longer time frame i.e. days rather than intraday
    -I will be using norgate futures data
    -I previously traded futures with AMP clearing but will have a look at interactive brokers. If I go with IB I could use their data.

    Time frame:
    -Next 2 months will be busy for me with my job but I intend to read and solidify my knowledge
    -Late Nov/Dec I may get data and start testing ideas
    -Trade dummy account sometime early next year and then take things from there?

    Would love to hear comments, questions, suggestions or if you think it is a stupid idea!

    Cheers
    JJ
     
    Trav., aus_trader and Skate like this.
  2. kahuna1

    kahuna1

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    Hmm ...

    Well trading is something I have spent my life at. Nowadays as you seem to be aware that most trading is done via computer systems verses the human decisions.

    As a fundamental sort of a guy, one who reacts to news or forces, in this modern world its a loose loose game at best. bad news comes out. Terrible news, market tanks, as expected, the humans do the correct thing, then the computer, idiot savant trend following imbecile machines see the selling has abated, sense there is more risk to the upside and hey presto ..... despite something that will doom say a stock totally, or an index or commodity ... or currency ... send it say a 12 months range one way over time, the idiot savant machines just follow the trend.

    So the sell off stops ... its gone down 5% of whats likely a 15% move, but for now the selling has stopped, slowly it creeps up and up and UP and those who missed the initial sell ... which is virtually everyone ... so they sold 2-3% down ... the commodity or index goes from 5% down to 4% to 3% ,,, basically break even for most, then its down a mere 1% ... and all hell breaks loose as the idiot savants who followed on its downward trajectory ... dont CARE ... that say the news of shocking proportions longer term occurred and off go the SHORTS stop losses ... and its back to unchanged .... then up 1% up 2% ... up 3% ... ab0ve the bloody starting point.

    Systems work fine .... SHORT term ones .... technical ones ... BUT they require diversification and trading say 100 comm0dites ... index's or stocks and currencies or currency crosses. Basically at any one time about 20 of the parameters in the 100 things your trading will either NOT be working or totally NOT working for about 10 .... so one needs diversification and massive computing and blinding speed to arbitrage at times things that seem not so connected but totally are such as say OIL to an OIL stock being traded and if its via a USA repository .... then comes in the exchange rate into the mix ...

    I could go on .... having built and run such things for 20 plus years.
    Thinking there is some magical or mythical system that will work all the time or even close to it, is .... a dream.

    There is no such thing.
    Discipline and a computer driven model is taking any human decision OUT of your hands. At times even that will NOT protect you in times of extreme news ... or say markets loosing all liquidity and even worse hitting limits for maximum daily moves and then opening the next day without trading locked limit UP or LIMIT down ...

    Bottom line, get say 30 quant guys and great programmers, about 100 million in capital and then one needs to be a broker and have execution rates of say $1- per futures contract or about $1- per $50,000 of stock so that's about 20% of what most pay for stock trading and 10% for most futures guys and YOU may stand a chance.

    Sorry, but ... being honest.
    Reading some fable tellers book about trading and follow this indicator or that one, has made many people rich and none of them via following some secret system. Some things work, then dont work, most wider longer term things just no longer work because RISK in the times we are in is not respected and with no human going, hey didn't that building that just had its stock appreciate 20% burn down ? Is quite a common occurrence.

    Quite often, and amusingly so. In say the year 2000 ... when I still had no grey hairs, the most admired company was a stock called Enron .... which amusingly on the same list which Google has erased from searches ... it was the Fortune Magazine list, had the least favored stock or company one called Trump Casino resorts.

    Amusing now in 2019, Enron which was mixed up with George W Bush Senior and Junior ... heavily involved in them, exposed as a sham and bankrupt ... loosing 3 billion of employees super funds and about 8 billion more and now in 2019 ... we have the fooool who was a crook ... in charge.

    Good luck with things. Diversify .... SHORT term .... High frequency ... it does work ... but you need 100 if not 500 things you trade or arbitrage so to speak.
     
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  3. aus_trader

    aus_trader

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    Wish I could provide actual experience, but I am no expert in Futures. Have traded Forex for a period of time but it's actually quite hard to make money consistently in Forex. Not to discourage you but I assume it may be as difficult to do so in Futures ? But since you have some past experience, you are in a better position to decide. Keep us posted with your progress...
     
  4. jjbinks

    jjbinks

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    @kahuna1
    Appreciate your honesty. Its what I'm after.
    I think some of what I have read so far echo's your message although the books are not so explicity/gloomy (they can't be if they want to sell!). But may strategies need require very diverse portfolio which needs much more capital than you need to trade stocks.
     
    cynic likes this.
  5. kahuna1

    kahuna1

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    Sorry ...
    If there was a secret system .... NO ONE ... would sell it.
    There are literally thousands of math masters, quant guys ... coupled with the best computer techs and artificial trend following programs that do this every day.

    YES ... it works overall, works quite well ... but unless you have ultra low cost brokerage and diversification over 100 plus products, it will not and does not work. Yes you may find the perfect system that works when back-tested and makes 10,000% over the last 12 months, likely it will break even at best the next 12 month or if you use 20 years back-testing you will find its the worst system EVER to use some years.

    Reality is what it is.
    I do find tech stuff of value ... when coupled with a very firm fundamental view. Quite often, the idiot savant models drive prices to absurdity prior to crashing. Then again, under estimating stupidity is never a wise choice. At times, shares worthless one can clearly see go from 10 cents to $10- and whilst they may eventually go back the whole way down, selling into ... a fools rally is why one diversifies and ant times MUST have extreme discipline and a stop loss.

    No magic wisdom sadly from me.
    The sellers of books or sage advice make more from selling courses ... books or rubbish than any advice they likely ever will give you.

    That is unless is meat and potatoes common sense stuff. Stop loss .... diversify risk. Sell into rallies and buy into dips. NOT the opposite.
     
    cynic likes this.
  6. Joe90

    Joe90

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    jjbinks and aus_trader like this.
  7. jjbinks

    jjbinks

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    @Joe90 those are great resources.
     
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  8. Newt

    Newt

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    Watching this new foray with interest jjbinks
     
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