So I created this software...

[Ian R.]

How long was your backtest period? I belive I saw 60 days, that's hardly a backtest, and it's heavily dependent on market conditions over that period. Which equities were you trading? How were they selected? Did you incorporate transaction costs in your backtests? Slippage? What's the frequency of your strategy? Were you using bid/ask prices or mid? There are many many more questions to consider when doing a backtest/presenting results. Answers to some of these may point to holes in your algo (or not).

60 days is the backtesting but the training goes as far as possible, sometimes over 10 years for some securities. The dow index which is also part of my training extends to 1929

 

[alain]

... The dow index which is also part of my training extends to 1929

This is a problem. You might be over fitting.

 

[Ian R.]

This is a problem. You might be over fitting.

Actually data which is not significant will be discarded using something I created... and the theory seems to prove it is working somehow.

 

[TobiAkin]

It is on a secured server and uploads results to a site every day No need to distribute my code

I didnt mean that, I meant if we can have the chance to try the software itself...

 

[Ian R.]

I didnt mean that, I meant if we can have the chance to try the software itself...

What form? source? executable?

 

[TobiAkin]

What form? source? executable?

I mean executable

 

[Ian R.]

FYI here is a typical pathway for backtesting proving potential gains:

2011-11-01,MAXY,0.988,0.010,5.90,5.16,Shorted,hold
2011-11-02,MAXY,0.982,0.010,5.90,5.39,Shorted,hold
2011-11-03,MAXY,0.972,0.010,5.90,5.40,Shorted,hold
2011-11-04,MAXY,0.983,0.010,5.90,5.61,Shorted,hold
2011-11-07,MAXY,1.029,0.020,5.90,5.61,Shorted,covered
2011-11-08,sigm,1.016,0.031,8.32,7.86,Shorted,hold
2011-11-09,sigm,1.104,0.031,8.32,7.29,Shorted,hold
2011-11-10,sigm,1.129,0.031,8.32,7.33,Shorted,hold
2011-11-11,sigm,1.080,0.031,8.32,7.49,Shorted,hold
2011-11-14,sigm,1.134,0.031,8.32,7.51,Shorted,hold
2011-11-15,sigm,1.085,0.031,8.32,7.22,Shorted,hold
2011-11-16,sigm,1.131,0.031,8.32,7.39,Shorted,hold
2011-11-17,sigm,1.229,0.031,8.32,7.01,Shorted,hold
2011-11-18,sigm,1.232,0.031,8.32,6.91,Shorted,hold
2011-11-21,sigm,1.259,0.031,8.32,6.78,Shorted,hold
2011-11-22,sigm,1.286,0.031,8.32,6.89,Shorted,hold
2011-11-23,sigm,1.355,0.044,8.32,6.89,Shorted,covered
2011-11-24,N/A,1.355,0.044,0,0,N/A,N/A
2011-11-25,N/A,1.355,0.044,0,0,N/A,N/A
2011-11-28,JNS,1.456,0.058,5.86,6.50,Brought,hold
2011-11-29,JNS,1.470,0.058,5.86,6.51,Brought,hold
2011-11-30,JNS,1.625,0.074,5.86,6.51,Brought,sold
2011-12-01,MGN,1.602,0.091,2.41,2.72,Brought,hold
2011-12-02,MGN,1.555,0.091,2.41,2.88,Brought,hold
2011-12-05,MGN,1.735,0.091,2.41,3.06,Brought,hold
2011-12-06,MGN,2.021,0.111,2.41,3.06,Brought,sold
2011-12-07,SWS,2.310,0.131,6.71,7.65,Brought,hold
2011-12-08,SWS,2.006,0.131,6.71,7.04,Brought,hold
2011-12-09,SWS,2.173,0.153,6.71,7.04,Brought,sold
2011-12-12,MIPS,2.090,0.175,4.57,4.92,Brought,hold
2011-12-13,MIPS,2.005,0.175,4.57,4.79,Brought,hold
2011-12-14,MIPS,1.930,0.175,4.57,4.85,Brought,hold
2011-12-15,MIPS,1.968,0.175,4.57,4.64,Brought,hold
2011-12-16,MIPS,1.958,0.175,4.57,4.61,Brought,hold
2011-12-19,MIPS,1.850,0.175,4.57,4.39,Brought,hold
2011-12-20,MIPS,1.902,0.175,4.57,4.52,Brought,hold
2011-12-21,MIPS,1.907,0.175,4.57,4.54,Brought,hold
2011-12-22,MIPS,2.053,0.175,4.57,4.75,Brought,hold
2011-12-23,MIPS,2.051,0.196,4.57,4.75,Brought,liquidate
2011-12-26,N/A,2.051,0.196,0,0,N/A,N/A
2011-12-27,N/A,2.051,0.196,0,0,N/A,N/A
2011-12-28,GIGM,1.553,0.216,1.01,1.30,Brought,hold
2011-12-29,GIGM,1.462,0.216,1.01,1.36,Brought,hold
2011-12-30,GIGM,1.484,0.231,1.01,1.36,Brought,liquidate
2012-01-02,N/A,1.484,0.231,0,0,N/A,N/A
2012-01-03,N/A,1.484,0.231,0,0,N/A,N/A
2012-01-04,KW,1.461,0.246,11.00,11.18,Brought,hold
2012-01-05,KW,1.394,0.246,11.00,11.00,Brought,hold
2012-01-06,KW,1.383,0.246,11.00,10.97,Brought,hold
2012-01-09,KW,1.445,0.261,11.00,10.97,Brought,sold
2012-01-10,EOD,1.412,0.275,7.90,7.53,Shorted,hold
2012-01-11,EOD,1.423,0.275,7.90,7.27,Shorted,hold
2012-01-12,EOD,1.434,0.275,7.90,7.32,Shorted,hold
2012-01-13,EOD,1.445,0.290,7.90,7.32,Shorted,liquidate
2012-01-16,N/A,1.445,0.290,0,0,N/A,N/A
2012-01-17,N/A,1.445,0.290,0,0,N/A,N/A
2012-01-18,STEI,1.558,0.304,5.84,6.62,Brought,hold
2012-01-19,STEI,1.582,0.304,5.84,6.59,Brought,hold
2012-01-20,STEI,1.582,0.304,5.84,6.66,Brought,hold
2012-01-23,STEI,1.582,0.304,5.84,6.64,Brought,hold
2012-01-24,STEI,1.646,0.304,5.84,6.76,Brought,hold
2012-01-25,STEI,1.646,0.304,5.84,6.68,Brought,hold
2012-01-26,STEI,1.646,0.304,5.84,6.87,Brought,hold
2012-01-27,STEI,1.675,0.304,5.84,6.78,Brought,hold
2012-01-30,STEI,1.621,0.304,5.84,6.74,Brought,hold
2012-01-31,STEI,1.582,0.304,5.84,6.64,Brought,hold
2012-02-01,STEI,1.680,0.304,5.84,6.82,Brought,hold
2012-02-02,STEI,1.626,0.304,5.84,6.66,Brought,hold
2012-02-03,STEI,1.680,0.304,5.84,6.94,Brought,hold
2012-02-06,STEI,1.837,0.304,5.84,7.12,Brought,hold
2012-02-07,STEI,1.808,0.304,5.84,7.15,Brought,hold
2012-02-08,STEI,1.749,0.304,5.84,6.97,Brought,hold
2012-02-09,STEI,1.729,0.304,5.84,6.92,Brought,hold
2012-02-10,STEI,1.636,0.304,5.84,6.78,Brought,hold
2012-02-13,STEI,1.695,0.304,5.84,6.96,Brought,hold
2012-02-14,STEI,1.636,0.304,5.84,6.74,Brought,hold
2012-02-15,STEI,1.563,0.304,5.84,6.90,Brought,hold
2012-02-16,STEI,1.661,0.304,5.84,6.79,Brought,hold
2012-02-17,STEI,1.625,0.320,5.84,6.79,Brought,liquidate
2012-02-20,N/A,1.625,0.320,0,0,N/A,N/A
2012-02-21,N/A,1.625,0.320,0,0,N/A,N/A
2012-02-22,ROYL,1.573,0.337,5.43,5.90,Brought,hold
2012-02-23,ROYL,1.543,0.337,5.43,5.77,Brought,hold
2012-02-24,ROYL,1.791,0.355,5.43,5.77,Brought,sold
2012-02-27,NPM,1.806,0.373,15.11,15.47,Brought,hold
2012-02-28,NPM,1.815,0.373,15.11,15.56,Brought,hold
2012-02-29,NPM,1.824,0.373,15.11,15.67,Brought,hold
2012-03-01,NPM,1.824,0.373,15.11,16.11,Brought,hold
2012-03-02,NPM,1.824,0.373,15.11,15.74,Brought,hold
2012-03-05,NPM,1.820,0.373,15.11,16.08,Brought,hold
2012-03-06,NPM,1.801,0.373,15.11,15.45,Brought,hold
2012-03-07,NPM,1.810,0.373,15.11,15.58,Brought,hold
2012-03-08,NPM,1.822,0.373,15.11,15.67,Brought,hold
2012-03-09,NPM,1.831,0.373,15.11,16.14,Brought,hold
2012-03-12,NPM,1.841,0.373,15.11,15.86,Brought,hold
2012-03-13,NPM,1.813,0.373,15.11,15.83,Brought,hold
2012-03-14,NPM,1.735,0.373,15.11,15.17,Brought,hold
2012-03-15,NPM,1.653,0.373,15.11,14.91,Brought,hold
2012-03-16,NPM,1.590,0.373,15.11,14.80,Brought,hold
2012-03-19,NPM,1.604,0.389,15.11,14.80,Brought,liquidate

First column is date, followed by ticker, then capital (say 2k = 1), then fees i.e 1% each way, finally put price i.e price at which I brought the security (for maxy above it was 5.90 at closing on 10/31/2011) then the readjusted strike price and finally the side, then what action took place that day. N/A stands for no good security were discovered

In this particular run, the capital is 160% of the original after rought 6 months i.e 100 business days.

About 40% is dispensed for fees and what we could call a "divident" payable to the investors.

After all people gotta live

Each day the prediction is made without knowledge of the next one of course. You can see the fluctuations...

At the end of the run we simply liquidate to tally the results.

The hardest part is when to EXIT a position... as the system, like a human being, is thorn between staying for more and cashing in.

Enjoy...

I guess my problem is I don't need to develop anything... the software is the proof in the pudding and I started using it myself for a profit.

But it takes a while to be rich when you only use a few K for this and Life is squeezing you. Call it trying to take off in the mud

Meanwhile there is a window of opportunity for an investment firm to associate themselves with me as this puppy could direct an entire hedge fund if extanded to play with forex, commodities and options.

That would be the career I seek: Extend and perfect a ready made product that is already useable.

Once I hit a sizeable personal capital... I will not need to associate myself with anyone. It will stay in the darkness of my personal memory forever

 

[euroazn]

 

[bullion]

ok dude. Most professionals here who's done any real trading are really just yanking your chains by now, and I'll save you some embarrassment. I can't comment on how good your strategy is, but this is looking desperate and pathetic for various reasons.

1) You're saying that you want others (banks) to take a chance on your magical formula with their capital. Once you're rich you'll pull the plug on them. Why will they do that? If they ever buy something from you, they are buying the source code and asking you to sign a non-compete agreement. So if you wanna keep your secret sauce a secret, keep it a secret.

2) Everything has a protocol. Especially with banks, people follow procedures to buy equipments, hire new people, and conduct businesses. Masters/PhD or not (and frankly, I don't even care if you're as smart as Spock and graduated from Vulcan Science Academy), walking around showboating your "track record" / backtesting / whatever you call it just shows how clueless you are about the industry and certainly won't win you any respect from any decision makers. You clearly have no idea what format / structure people expect from professional backtesting, and no one will want to be associated with you no matter how smart you are. If you want to play the game, learn the rules.

3) You've probably put in a lot of work in your trading system, and I applaud your effort. You may very likely take over the world in a few years and I'll have to slave myself away for a job to work for you. But before that happens, you need to know how the quant trading / asset management business is run. A good entry will be this book. This book doesn't give you magical alpha models, but it does show what industry standards are for backtesting, scaling, maintenance, etc. People don't hire quant traders for how good their systems have worked in the past. Funds seek intelligent individuals who can evolve over time with market conditions and work well in the office with others.

This is not the technology industry or setting up a lemonade stand, and people can care less how "disruptive" your discoveries are. The banking industry has many unwritten traditions / rules of thumbs / decorums, and everyday they get some cocky sob promising millions with the latest gadgets. So be humble and prove yourself through the traditional ways first (work at a quant shop, make money for your boss). You're way too early to strike out on your own.

There are some very experienced / heavyweight people lurking around this forum. If you can't discern their sarcasms / skepticisms / disregard by now, NO ONE will want to work with you... ever. So please do us all a favor and stop posting / responding. Just let this embarrassing thread get archived. It's quite an eyesore

 

[Ian R.]

Sure but all of these I already did as listed in that book:

• Find a viable trading strategy that you're both comfortable with and confident in
• Backtest your strategy—with MATLAB®, Excel, and other platforms—to ensure good historical performance
• Build and implement an automated trading system to execute your strategy
• Scale up or wind down your strategies depending on their real-world profitability
• Manage the money and risks involved in holding positions generated by your strategy
• Incorporate advanced concepts that most professionals use into your everyday trading activities

On a very limited scale of course but nonetheless I infered several parameters that prove to me there is a decent correlation.

One reader also says:

37 of 46 people found the following review helpful
2.0 out of 5 stars Somo interesting insights..., December 26, 2008

By​

AGJr (Sao Paulo, Brazil) - See all my reviews​

Amazon Verified Purchase(What's this?)
This review is from: Quantitative Trading: How to Build Your Own Algorithmic Trading Business (Wiley Trading) (Hardcover)
... but too shallow. Most of the content is just common sense, and most of the technical part, including Matlab and Excel code, of little use. Nevertheless, it gives you a blueprint of important things to take into account when going into Algorithmic Trading.

I will certainly not publicize anything more. Indeed the pathway is go at it alone, and as far as someone can trade using quickfix and good C++ skills with a trading account I will slowly grow my capital.

Best is stealth and this thread showed me what it is about. Good ideas are best left unpublicized.

For the record I had to implement all the greek formulas used for option trading as well as implement several multileg strategies using quickfix/C++ and quickfix/Java together with optimization to make them ultrafast.

Now indeed I don't claim my software can do any profits if scaled up... maybe even provide a negative return. My goal is not be cocky nor pretentious.

I work in the financial industry after all

 

[APalley]

What form? source? executable?

Source code, executable -- same difference...

 

[Ian R.]

Source code, executable -- same difference...

well for starters who knows quickfix here? and was able to configure actual protocols to communicate with the likes of Morgan Stanley and Goldman Sachs?

I am afraid one can be the best statistician around to evaluate quant software... it also comes down to the nitty gritty of hardcore trades and quotes processing.

 

[Sexbomb]

Finally Someone has the Holy Grail
Frankly,I have several Trade setups Backtested for >75% success Rate *On Paper* but In Harsh Reality They suck just like Brian Hunter
Moment of Truth: Even the best of best Hedge funds are not even close to 12/13 = 92.xx % Success Rate. So,Even if what you are
saying is true Chances are with such a genius at disposal you will end up in Govt Facility with some Sleazy Govt Scientists running
tests on you.

 

[Ian R.]

Paper trading is worthless... that is a fact. And to test a system large scale.. you need a lot of money too

 

[Sexbomb]

I never said *Paper Trading*I said Results were on Paper just like yours
There is difference

 

[helpteye]

Are you even remotely serious? If I understand you correctly, taking your claim of a 30% monthly return, even with a thousand dollars as your initial investment, why not just let that sit for 12 months and take the ~$20K you'd apparently have earned? You could live on the passive income. Better yet, invest your $1,000 and wait two years, take the cool $500K and buy yourself a place on a greek island when they default. Presumably, someone with your talent has done some good backtesting of your strategy over a longer period than a single month, and additionally, would realise that with a 30% monthly compounding return, you'll be richer than God in just 3 years, having turned your intial investment into a very boast-worthy $12.5Million. Sell your software then, I'm certain you'd have no shortage of potential buyers. Sigh.

LoL; My thought exactly.

 

[helpteye]

This reminds me about 2 years ago when I was working in an investment bank and a small new hedge fund manager called us swearing he could make 2000% annual returns.

lol

 

[bullion]

Ian R.
I give you a book and you copy the first paragraph of the editorial reviews? Man, you're incorrigible.

Find a viable trading strategy that you're both comfortable with and confident in

Yes, you have a lot of confidence and definitely comfortable to show it

Backtest your strategy—with MATLAB®, Excel, and other platforms—to ensure good historical performance

What are the procedures for backtesting? How should your quote samples be designed? How do you account for paradigm shifts? What economic conditions / microstructure behaviors are you taking advantage of

Build and implement an automated trading system to execute your strategy

System up/down time, reliability, broker connectivity, order delivery

Scale up or wind down your strategies depending on their real-world profitability

What does it mean when a strategy / instrument is "scalable"? Where are your source of liquidity?

Manage the money and risks involved in holding positions generated by your strategy

What are the metrics for risk management? VaR? Sharpe Ratio? What exposures / protections do your overnight positions have?

Incorporate advanced concepts that most professionals use into your everyday trading activities

Do you even know what "most professionals" use?

... but too shallow. Most of the content is just common sense, and most of the technical part, including Matlab and Excel code, of little use. Nevertheless, it gives you a blueprint of important things to take into account when going into Algorithmic Trading.

BUT YOU DON'T HAVE COMMON SENSE!!!

I will certainly not publicize anything more. Indeed the pathway is go at it alone, and as far as someone can trade using quickfix and good C++ skills with a trading account I will slowly grow my capital... For the record I had to implement all the greek formulas used for option trading as well as implement several multileg strategies using quickfix/C++ and quickfix/Java together with optimization to make them ultrafast.

Good for you. FIX experience can get you a nice entry for developer jobs, but for your purposes it's not that important (especially since you're swing trading.) It's also not that difficult for an experienced C++ programmer, so you're not impressing anyone.

I work in the financial industry after all

And which firm do you work for? We need to take it off the QuantNet recruiter list for as long as you're there...

 

[jqotob]

Trololololololol.

 

[Ian R.]

This reminds me about 2 years ago when I was working in an investment bank and a small new hedge fund manager called us swearing he could make 2000% annual returns.

That is impossible of course... 15-20% per month is feasible for small volumes where the net profit is 1-5% after fees, but it will level off dramatically afterwards.

On large volumes about 5% would be the maximum ever possible...

Backtesting for long durations shows me 1-1/e convergence to Alpha monte carlo pathways.

Here is an illustration of the exponential function: