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Tools being used by your trading competition

Discussion in 'Trading Strategies/Systems' started by howardbandy, Dec 10, 2016.

  1. barney

    barney

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    You may be surprised Sam .... you have been one of the most interesting people around ASF in recent years ...I would be very interested in your personal trading journey and trading strategies on many levels so please don't think the rest of the punters aren't interested in your story etc:cool:

    Personally i don't fit your desire to see a long term successful trader, although I am now into my third successful positive year in succession but that is another story, and one I'm obviously happy about, but it is rightly tempered with great humility and respect of the markets! Will it continue? Who knows; I'm no Quant!!:)

    I know you were doing some great stuff on the Dax, so I'd be the first to welcome another "Sam thread" on any or all of your musings in relation to anything trade related.

    Cheers M8.
     
  2. ThingyMajiggy

    ThingyMajiggy

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    Yeah good point :xyxthumbs

    Thanks barney! Well done on the 3rd positive year! :cool: Would definitely be keen to hear more!

    Yeah I've still got some ideas to further build on the work I was doing in the Pull up ya DAX thread, whether it will come of anything or not is another matter, but interesting none the less :)

    Thanks for the input!
     
  3. howardbandy

    howardbandy

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    Greetings --

    A few of the comments posted cry out to me for response:

    -------------------

    Supply/demand and sentiment drive prices, not computer programs.

    We -- all people -- regularly try to assign causality. Correlation is fairly easy to detect, but causality is much more difficult. The best we often can do is react to the evidence. In this case, react to whatever prices appear in the history as we are developing trading systems and in the tick-by-tick transactions as we are trading. Computer program may or may not drive prices, but computer programs are the tools of choice for analysis.

    -------------------

    If a trader is truly successful, they run into liquidity issues.

    There are hundreds of equity related tradable issues that have daily liquidity on excess of 10 million dollars per day. SPY has liquidity in excess of 20 billion dollars per day. Many highly liquid issues have bid-ask spreads of one cent.

    Following the advice of "the data prospector" outlined in both my "Quantitative Technical Analysis" book and "Foundations" book, select one tradable issue that has the characteristics that allow it to be traded profitably and work with it. To recap, those characteristics are:
    1. enough volatility to offer some profit.
    2. not so much volatility that risk is excessive.
    Given that the issue passes both filters 1 and 2:
    3. patterns in the data that precede profitable trading opportunities.

    If liquidity is an issue, then either:
    1. the trader is trying to trade issues that are intrinsically illiquid -- penny stocks with wide bid ask spreads, for example. Try sector-oriented exchange traded funds as an alternative -- XLB, XLE, XLF, ...
    2. the trader is already a big player trading millions of dollars per day.

    --------------------

    Variations of "some people make better judgements than do computer programs"

    Both research and actual performance consistently show that well developed computer algorithms are much more accurate and consistent than the subjective decisions made by people.

    Granted, some people have good results over some periods using subjective judgement -- and we hear about them. And many people do not -- and we seldom hear about them. The single book I recommend to everyone who asks "what should I read to learn about trading?" is Daniel Kahneman's "Thinking, Fast and Slow." Dr. Kahneman explains how, and in some cases why, we are so good at fooling ourselves -- the biases in our thinking that we ignore.

    Those traders who are good at identifying global trends and selecting stocks that will benefit should continue to do that. Those who are successful due to luck in some form or another should plan for a time when performance suffers and decide how to recover. If the recovery will be an algorithm, the techniques I recommend will help. If the recovery will be subjective, I cannot offer helpful advice.

    -----------------

    Python is just a language

    Correct. It is the opportunities available for development and management of trading systems through use of Python that are exceptional.

    For people who want to simply translate a decision tree trading model from TradeStation or some other development platform, I have published a line by line example. The result is the same trading system, with the added capability of follow-on analysis of risk and position sizing not available in a traditional platform.

    For people who want to expand to any of twenty or more models, scikit-learn opens an extensive library of machine learning techniques. One that works well is an ensemble of thousands of individual decision trees combined as a "random forest" model.

    ------------------

    Thanks for listening, Howard
     
  4. OmegaTrader

    OmegaTrader

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    Warren Buffet is a Quant.


    You learn something new everyday.......
     
  5. minwa

    minwa

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    Unlikely.

    The geeky glamour of the quant took a big hit with the financial downturn, beginning with the so-called quant crisis in the summer of 2007, when quant funds took a nosedive. “All I can say is, beware of geeks bearing formulas,” Warren Buffett memorably told Charlie Rose in October 2008.

    http://www.nytimes.com/2010/05/16/magazine/16FOB-OnLanguage-t.html

    In my opinion, investment success
    will not be produced by arcane formulae, computer programs or
    signals flashed by the price behavior of stocks and markets.
    Rather an investor will succeed by coupling good business
    judgment with an ability to insulate his thoughts and behavior
    from the super-contagious emotions that swirl about the
    marketplace.


    http://www.berkshirehathaway.com/letters/1987.html
     
  6. Roller_1

    Roller_1

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    Does Howard (or do you Howard) have some kind of track or performance record that is publicly available?
     
  7. Gringotts Bank

    Gringotts Bank

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    That's successful trading right there. That one sentence. How to understand the potential for pain (losing) and pleasure (winning), and be relatively unaffected by the possibility of both... all the time retaining an intention to win.

    It requires a complete re-wiring of the 'usual' mind. The usual mind is afraid of loss and desperately seeks to win.

    Some people cope with that threat mathematically ("if I do x and y, then z is likely"), others by mental discipline.
     
  8. Wysiwyg

    Wysiwyg Everyone wants money

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    Respectfully disagree. Another (direct) cause that drives price is news events. One less obviously causal is inside information which is not immediately obvious until the outsiders get the news.
     
  9. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    Interesting request. Howard is not here to sell you python courses....he's a recognized author and retired professor....why would he need to have a track record?
     
  10. Gringotts Bank

    Gringotts Bank

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    He means trading track record, not academic or career record. I'd like to know too. After all, Howard is right up there when it comes to systems trading, so it would give us all a good benchmark of what's possible. Even if Howard was using a bank of quantum computers to generate signals, it wouldn't mean anything without return$.
     
  11. Boggo

    Boggo

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    That was similiar to what Kerry Packer and Ashok Jacob told Mark Silbermann when he told them that his formula on Onetel's finances indicated that Onetel was headed for failure.
    They then had Silbermann physically removed from the meeting because they thought they knew better.

    Three weeks later Onetel went into receivership.

    (Kerry also commented on ch9 that Merv Lincoln (StockDoctor) was just another idiot and didn't know what he was talking about when he reported that by his StockDoctor formula Onetel was doomed to failure)
     
  12. Wysiwyg

    Wysiwyg Everyone wants money

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    An excerpt from an interesting article posted on November 3rd 2016. History never repeats?

    http://www.zerohedge.com/news/2016-11-03/someone-wrong-why-quant-war-means-vol-set-soar
     
  13. tech/a

    tech/a No Ordinary Duck

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    The Fundamental champion is Buffet
    The Quant champions Massive hedge funds

    But it's about being able to use fundamentals and increasingly data analysis in YOUR trading
    That doesn't remotely resemble the above.

    I just can't see how people can't grasp this opportunity.

    Oh well.
     
  14. ThingyMajiggy

    ThingyMajiggy

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    I think some are missing the point, that it's not about algos/HFT vs discretionary, but using data analysis in/with your own trading. I guess a lot of it is statistics work and helping find/validate an edge or just improving your chances of finding profitable trades. From what I've seen of machine learning, guys are just using it in a directional sense, if it can give you a strong hint about whether tomororw, or next week will be up or down, that's a fairly big hint that you could potentially position for.

    I'd like to see this stuff in action, but to do that I'd have to learn/do it all myself no doubt, which I'm in the process of, seems to be lots of discussion on it but not much evidence...yet. I'm all ears/eyes, if there's something that can improve your trading, I'm not sure why you'd want to shut it down just because it's an algo/ML and you're adamant about the algo vs discretionary war.
     
  15. Wysiwyg

    Wysiwyg Everyone wants money

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    I'm interested in some substance to this thread. Is there any substance?
     
  16. Trendnomics

    Trendnomics

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    Nope.
     
  17. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    Good grief....there are so many different time frames and markets that are traded...seems a broad brush to tar everyone with the same feathers here.

    Regarding intra-day trading. You can clearly see algo activity at certain times of the day/session. Anyone worth thier salt has always known that there are times of day to trade, Algoes still need baby sitters. If you trade intra-day know when to trade, applies to discretionary and algorithmic-ally....
     
  18. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    As long as the futures market has an order book with 100% transactions hitting it, i think the opportunities will be there for alert, trained eyes....if transactions somehow migrate away from the book, to some kind of 'dark pools' all bets are off for the little guy.:2twocents
     
  19. howardbandy

    howardbandy

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    What would substance be?
     
  20. Wysiwyg

    Wysiwyg Everyone wants money

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    Hello Howard. Substance? Evidence in the form of results or more to the point, evidence in the form of trading algorithms or methods.
     
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