Algorithmic Trading at home - how should I get started?

quantstart

quantstart

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Hi everyone,

I'm keen on getting into algorithmic trading at home (primarily paper trading right now). I'm a capable software dev, so that's not an issue, but I would like a heads up on what protocols are out there, what reference texts are worth looking at, which blogs to read etc.

Where does one start?

Mike.
 
Mike,
You may want to take a look into the past "Interactive Broker Olympiad" threads. IB used to run these trading contests first place got 100K. Many of our members have won money in the past contests.
Gus won second place (50K) in the last contest. He got his own trading firm.

Ernie Chan has a good blog. He gave an interview to Quant Network recently
Interview with Ernie Chan, quant trader and author

We will come out shortly with an article for beginner algo traders.
 
I had made a small algorithm. You can maybe use it if you want.

It's basically using Exponential Moving averages.
I made the program on MATLAB and output it onto a .NET file. I used MB Trading's third party broker platform. They have an API on their software. You put the .NET file onto their API and let magic happen.

I had the program calibrate itself by taking the points where the sharp ratio was the highest continuously. I had an excel file with open, close, high and low, that would be updated in real time.

I can send you the MATLAB files maybe? Send me a message with your email. It's old though and not the best but it will help you start? I think I had seen a video about it or something somewhere back in the day and that's how I made it. I am not sure now.
 
Ahhh yes, I've had of Ernie Chen, he has written a book on the topic. Is it worth picking up? Thanks for the thread list, Andy.

Joy - as it happens I don't own MatLab, but I do have Python. I don't suppose there are any UK brokerages that have a REST style API? If so, I could work through that...
 
Sorry, I am not too sure about that.

I don't know anything about Python unfortunately, so can't help you out. I think MATLAB student version is only $99.
 
Automated Trading sub-forum on elitetrader website is the place where all your same thinkers hang out.

---------- Post added at 12:33 PM ---------- Previous post was at 12:08 PM ----------
quantstart said:
Ahhh yes, I've had of Ernie Chen, he has written a book on the topic. Is it worth picking up?
Click to expand...

It's an excellent book if you are just starting. He isn't elaborating on different strategies but gives a nice and comprehensive overview of everything that involves quant trading. It is a very easy read so you'll be done with it quickly. However, it is a read-once kind of book so once you're over you won't come back to it. Borrow it from someone if you can otherwise just buy it.

Ernie Chen also has a blog where you can ask him questions:
Quantitative Trading
 
I almost experimented with personal algorithmic trading at one point but my biggest obstacle by far was getting correct brokerage services, at least in Canada. You need to find a broker that is willing to take automatic orders (duh!) and one which has a very low transaction fees package. Algorithmic trading, to the extent of my knowledge, relies on making tiny profits on a lot of transactions. Thus your expected return on each transaction needs not only not be positive but also larger than your transaction fees.

If someone thinks I wrongly exaggerated the scale of this problem let me know as I am still interested in the topic.
 
Well you can get the algorithm to put out P&L curves and you can make sure that it is always nice and positive. The one I made, I made it put out P&L curve and Sharp Ratio graphs and self calibration based on that. I am a n00b though. I am still learning.
 
My biggest problem is probably that I'm UK based. Does anybody know of any good brokerages over here that accept automated trades, for low fees?
 
I don't know about the equities, but I can tell something about forex automated trading platform. If you looking for free automated trading, probably you can open an account with Forex.com(Supports UK account) and they have tie up with automated trader platform like Ninja Trader, Strategic Runner and one more guy. I don't remember the name. Sign up with anyone of the Automated trader ( Based on, in what language you want expertise your automated trading) and link you forex.com account with them. You should be good to do your automated trading by writing your own algorithms. I signed up with Ninja trader, because they support C++ in their platform for writing trading algorithms.

I believe Ninja trader also supports equity automated trading, but i'm not sure, you have to find out with which equity services they have tie up with. I hope this helps you to some extent..
 
You have to be careful with IB because Timber Hill is their internal Market Maker and they cross orders unless you specify an exchange. If you specify an external exchange you both pay/receive ECN fees for adding/removing liquidity and there is higher latency getting through IB to the exchange.

It all depends on your holding/investment time frame. For longer, intra-day trades TH is probably fine. If speed/latency is a concern be cautioned.

---------- Post added at 11:31 AM ---------- Previous post was at 11:29 AM ----------
quantstart said:
My biggest problem is probably that I'm UK based. Does anybody know of any good brokerages over here that accept automated trades, for low fees?
Click to expand...

EDIT: I didn't read this before I posted. Are you looking to trade NYSE or London?

If you are looking to trade London I'd look at some London prop shops or bigger banks (I know Merrill and GS have prop desks over there). If you want to trade USA/NYSE then anywhere is fine.
 
It is VERY hard to start an ATS on your own. I'd be happy to answer any questions I can. The hardest part (IMO) is a position management engine. I just started recording London data so its pretty new to me but my clearing/execution is through ML. Without going to a major I-Bank you could try looking at a prop-trading shop and fund an account with a few thousand (dollars or pounds) to get started.

EDIT: PS I have found Elite Trader to be a waste of time. Mostly bench racers with no experience. There are a few out there that are in the know but they don't usually post or share.
 
Joy Pathak said:
I had made a small algorithm. You can maybe use it if you want.

It's basically using Exponential Moving averages.
I made the program on MATLAB and output it onto a .NET file. I used MB Trading's third party broker platform. They have an API on their software. You put the .NET file onto their API and let magic happen.

I had the program calibrate itself by taking the points where the sharp ratio was the highest continuously. I had an excel file with open, close, high and low, that would be updated in real time.

I can send you the MATLAB files maybe? Send me a message with your email. It's old though and not the best but it will help you start? I think I had seen a video about it or something somewhere back in the day and that's how I made it. I am not sure now.
Click to expand...

Joy... I would be interested in taking a look at your algo if your offer still stands.

CMJ
 
Andy Nguyen said:
Mike,
You may want to take a look into the past "Interactive Broker Olympiad" threads. IB used to run these trading contests first place got 100K. Many of our members have won money in the past contests.
Gus won second place (50K) in the last contest. He got his own trading firm.

Ernie Chan has a good blog. He gave an interview to Quant Network recently
Interview with Ernie Chan, quant trader and author

We will come out shortly with an article for beginner algo traders.
Click to expand...
Did this article ever come out? I know this post is old, but thought I'd check. Thanks!
 

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