Preparing Strategy For Go-Live

I’ve been too busy to post for the last few weeks because am trying to get things together to launch the first strategy for trading (as part of my trading startup).    Have 4 strategies right now but decided to start with the simplest of the lot.   It operates on a basket of equities at medium/low frequency and has excellent returns and drawdown profile.

I won’t jinx it by indicating the performance profile (which is pretty exciting).   Will post some results after it has a trading track record.   Right now have just done the backtesting and some trial trading (affected manually).

The next steps are negotiating commission with broker(s) and connectivity.   Details at this point, but will take time.

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9 Comments

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9 responses to “Preparing Strategy For Go-Live

  1. Regarding the high quality (or complexity) of your ideas posted on this blog, it should really be something exceptional that you find ‘pretty exciting’. Could you at least shed some light on the type of the strategy used, is it stat arb, market neutral or directional? Do you trade etfs or stocks?

    • tr8dr

      Hi, took a look at your blog. Interesting stuff there, added to my blog roll.

      As for posting more about the strategy, may do so soon. This particular strategy looks at about 2200 stocks and ETFs, and create a portfolio of a fraction of those, changing weights or assets from period to period. As for how the assets and weights are chosen, can’t talk about that right now.

      In general, though, I am opportunistic. Have strategies applicable to FX and Fixed Income, in addition to equities.

      Do you do your work in matlab (seeing your url?)

  2. What commission do you anticipate being able to negotiate? Please let us know if you find any good brokerage deals. I’m excited to hear how your strategy pans out, keep us informed!

    I’m UK based and hence finding a broker willing to accept algorithmic orders for a good price is challenging. Is anybody aware of some?

    • tr8dr

      Well, it really depends on your size. My startup is much too small to be in a prime-brokerage relationship (for the moment). So am dealing with the sort of brokers high net worth or professional independent traders work with (for equities places like IB or Fidelity). Depending on your volume some are willing to negotiate more favorable commissions.

      Note that I am not trading at high frequency (ie in and out in ms, secs or few minutes), so commissions are not critical to my strategies, but nevertheless represent a significant amount of money on a monthly or annual basis.

      • Do you have any plans to setup a high frequency system? The low latency requirements coupled with the system development costs makes it a prohibitive option for me at this stage. Something best left to the hedge funds who can shoulder the infrastructure cost. Not to mention the commissions!

  3. tr8dr

    @ Michael – My infrastructure is actually geared for high frequency, however, unless you have a prime brokerage or direct relationship with venues, and colocation is a losing game IMO.

    HF is also a very saturated space and the game is evolving rapidly. I know of a fund where they were making money on a couple of strategies that now no longer work. They are now struggling to find new HF strategies.

    I am happy to trade at medium freq intra-day and also take longer term positions. It is a different game, but does not require an asymptotic technology arms war, just research.

  4. Agreed – the natural conclusion to the “mutually assured destruction” of high frequency trading is that nobody wins.

    Are your strategies based primarily on time series analysis (i.e. technical trading) or do you try and model phenomena and trade on model/market discrepancies?

    • tr8dr

      I trade on models and not technicals, though sometimes use technicals in execution.

      That said, given that there is often strong autocorrelation in price series, it implies that some momentum / trend based technicals have a statistical basis.

      The problem with most technicals is:

      a. they are generally lagging indicators
      b. they tend to work only in certain market conditions

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