Does automated trading and technical analysis work?

Following on from the discussion at:

https://strategyquant.com/forum/topic/3255-portfolio-doing-well/

I thought I would create a new topic. 

I anyone wants to share views on this (does it work, here’s the proof) please do.  There’s no right or wrong answer, let’s keep it open minded and as scientific as we can.

Any links to myfxbook verified results appreciated, doesn’t have to be your own system, just something that proves real money is being made by traders over a number of years. My personal view is it can’t be done by using historical prices alone, you need an edge outside of just number crunching past data.  It needs to know the market sentiment now, and what’s happening in the near future.  Any ideas along these lines welcome.

If technical analysis alone worked, we’d be falling over forex millionaires down the pub. All I see is people getting rich selling courses and books and software.  If you ask where the rich forex retail traders are, they have all mysteriously gone silent on some exotic beach, never to reveal their success.

If you join Fundseeder you see many guys there having reasonable stats using systematic (SY) / technical approach (TE). All stats are verified. It’s directly connected to brokerage accounts.

For me it all comes down to ability to see the “big picture”. For a manual trader it takes few seconds to evaluate context in which an entry signal appears. He quickly sees whether the “triangle breakout” or “SR breakout” or whatever does or does not make sense. For me this ability to evaluate the big picture is the key for long term “stability”.

With auto-trading it’s very difficult to get same evaluation. You usually have to rely on much simpler approach as a retail auto-trader which of course cannot beat human’s experience and discretion. I see kind of fairness or equilibrium here and I have accepted that.

Still making reasonable and working system based on technical (systematic) approach is not that difficult especially with tools like SQ. For the reasons mentioned before I always expect such system to fail (compared to manual trading) but as long as it performs within pre-defined boundaries I am ok with it.

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There is another place with managed futures based on Automatic live trading bots traded in live accounts (www.striker.com). I was about to invest in this but found SQ and decided to test that  first. It was a good decision since i found that SQ can find some good simple strategies and the system i was interested in has been in a large draw down, so right now i would have been pissed.

There is a seminar in New york this month that i wanted to go to but i skipped that since it was to expensive and you need to be a programmer to follow and get something out of it . The seminar arrangers today all trade up to 100 strategies each simultaneously and are all previous world champion futures winners. The traders at seminar are Andreas Unger, Kevin Davey ,Time Rea and one more which i forgot.

Here is a link to Algotradertoolkit written by Kevin Davey. 102 pages of what to do and not do when building algos

http://futures.guru/AlgoTraderToolkit.pdf

I was going to go to that seminar too but I couldn’t. I think they’ve all been on BetterSystemTrader podcast.

They’re all damn good technical-based traders (completely systematic and World Futures Trading Cup winners).

There is another place with managed futures based on Automatic live trading bots traded in live accounts (www.striker.com). I was about to invest in this but found SQ and decided to test that  first. It was a good decision since i found that SQ can find some good simple strategies and the system i was interested in has been in a large draw down, so right now i would have been pissed.

 

There is a seminar in New york this month that i wanted to go to but i skipped that since it was to expensive and you need to be a programmer to follow and get something out of it . The seminar arrangers today all trade up to 100 strategies each simultaneously and are all previous world champion futures winners. The traders at seminar are Andreas Unger, Kevin Davey ,Time Rea and one more which i forgot.

 

Here is a link to Algotradertoolkit written by Kevin Davey. 102 pages of what to do and not do when building algos

 

http://futures.guru/AlgoTraderToolkit.pdf

Hi,

Thanks I’d never seen striker.com before.  Looking at one of the systems there, using Google I found it on another website:

http://tradingvisions.homestead.com/AXIOM_Index.html

This has some interesting information on how these systems work.

I am wondering if the advantage here trading the futures markets algorithmically over the spot market is easily seeing the market depth and order book in each case?

Cheers,

Mike

PS the idea of this thread is to discuss whether pure TA works in automated trading, and to bring out examples, discuss best markets where it does, and how to incorporate fundamental analysis into the TA decision making if possible.

Hi

Volume and order book and if seeing those help. No depends on how you trade you can of course base your entire system on that as well but you will not have a better winning rate then on anything else. . ROC or rate of change i simpler. Futures moves alot and there are many and for sake of diversification it easier to find uncorrelated instruments.

I was going to go to that seminar too but I couldn’t. I think they’ve all been on BetterSystemTrader podcast.

They’re all damn good technical-based traders (completely systematic and World Futures Trading Cup winners).

I got a news letter today from one of these traders that had been on a seminar this weekend saying this.

” Developing strategies is REALLY hard – Quantopian is a backtesting platform, where users can upload strategies.  So far, over 3,000,000 strategies have been uploaded.  Of that large number, Quantopian has determined that only 8 are worth live trading! “

Howe ever when i have been traveling  SQ have created and tested 60 million of them 😉

I’m looking at Quantconnect now as an algorithmic development platform and backtester.

I got a news letter today from one of these traders that had been on a seminar this weekend saying this.

 

” Developing strategies is REALLY hard – Quantopian is a backtesting platform, where users can upload strategies.  So far, over 3,000,000 strategies have been uploaded.  Of that large number, Quantopian has determined that only 8 are worth live trading! “

 

Howe ever when i have been traveling  SQ have created and tested 60 million of them 😉

and how many from that 60 million passed?

Only one  because it is very simple with wide stops and large profittargets on daily chart.  You would need some 35 k to trade it  and allow for 40 % drawdown.

so quality better quantity …

 

 

 

LongEntryCondition = (HighDaily(5) > ThisBarOpen())

ShortEntryCondition = (LowDaily(5) < ThisBarOpen())

 

This is a simple entry condition.  It has 15 years of OOS data with only a few loosing years.I currently play around with different exit conditions which i find gives interesting results.

 

Personally I wouldn’t be willing to trade such a system with real money.  Drawdown/stagnation periods that last years are just not bearable, not for me anyway.  After a few months you’d be questioning whether the strategy really works and I would probably pull the plug.  It’s human nature.

Out of interest what is the Return/DD figure?

Return/DD 7,4.  It does very few trades, one per week . So it would have to be a part of a basket of strategies. 

Return/DD 7,4.  It does very few trades, one per week . So it would have to be a part of a basket of strategies. 

The other problem is open trade drawdown on strategies that keep trades open for weeks or months. SQ doesn’t contain any charts showing MAE and MFE analysis, but if you look at the list of trades in SQ, you can see these values for each trade.

If you sort by MAE ascending you can see the open trade drawdown.  If there are lot of large numbers, this is how much the strategy is in a losing position before it was closed.  Again a lot of big negative numbers is going to make it look like your strategy is failing, and if your positions size is too big, could lead to a margin call.

On daily chart like this generated strategy was created on  99.9 % of the loosers are closed the same day. It is only the winners that  have opentrade drawdowns, This strategy also had a BE stop at close of the day . I actually never used that  but for daily charts i think it is okey. In manual trading i do this alot or at least move it to the closest pivot and then i don´t have to sit infront of the putor trying  not to close the trade to soon and usually the winners are much greater if you don´t sit infront of the putor. But you are right with a basket of strategies you are at risk for margin calls.