Auto Trading System

Posted by downtowntrader | 8/19/2008 09:31:00 PM | 1 comments »

I posted this on downtowntrader.com tonight regarding an Auto Trading Robot I have been testing.

I’ve mentioned how I’ve been working on an Auto Trading System previously, and so far it has gone really well. I’ve been testing some strategies over the past three months using a paper trading account and it has actually performed better then I expected. I feel very comfortable with the safety and reliability of all the components to the point that I feel I can leave the bot unattended for short periods of time. I could theoretically leave it unattended all the time, but I prefer to keep tabs on it in case some strange market condition appears that would trigger an excess of alerts.

I had been thinking of running an auto trading system for quite some time, due to several factors including having a full time career, my love for building and testing strategies, and the fact that automated trading aligns very well with my personality. Even my discretionary trading is very close to an automated system in how I enter and exit positions. I initially looked at all the different players in this field including tradestation, ninjatrader, aiq, and even building a bot from scratch, but my lack of programming skills made it difficult to get started. I had friends that were willing to help with the programming, leaving me to focus on trading strategies, but collaborating on ideas was cumbersome and time consuming at best.

Funny enough, a few months after I began my search, my friend Dave from stocktickr.com mentioned how he had arrived at a similar conclusion about adding auto trading to his arsenal and how he was working on a trading Bot that would interface with Trade-Ideas. He was open to allowing me to help him beta test the software for him and in the process, it was the perfect environment for me to build some strategies around a product that I already used and loved. Dave has really created a fantastic product that has some very unique features compared to some of the other products I have looked at. The components are as follows:

Stocktickr Trading Bot: The Bot is responsible for tying all the different components together and is the brains around the ATS. The Bot is where you create, edit, and run trading strategies. Trading strategies are centered around receiving an alert from the Trade-Ideas Software, using trade management rules such as position sizing and stop loss management created in the Bot, and rerouting the signals as orders in Interactive Brokers. Once positions are closed, the Bot logs every trade into a users Stocktickr journal. There are several options including what times to trade, how to manage risk, and how to alert yourself of trades. You can also have multiple exit orders such as a trailstop and timestops to close positions before the market closes. All full subscription users of stocktickr.com have access to the trading bot software.

Trade-Ideas Software: This is where the trading signals come from. Trade-Ideas is a real time market scanner that generates alerts based on the criteria you enter. There are several strategies prepackaged with the software and it’s fairly simple to create your own. The software lets you choose a predefined alert, and then you can customize it with numerous filters. There are several alerts to choose from, and while you can’t program your own, the folks at Trade-Ideas are always adding new ideas. Just recently they even added some fundamental data filters. Some may find it limiting that you can’t program indicator based strategies such as MACD crossovers and such, but I’ve found those basic strategies pretty flawed. The alerts you can build from Trade-Ideas are very powerful, and I would venture to say you could probably use some of the prepackaged alerts pretty successfully. I’ve been using this software for years now, and it’s fantastic. Here is a prior review.

Interactive Brokers TWS: This is simply the Interactive Brokers Trading Platform. It is responsible for all orders once they are passed by the Bot. The beauty of this setup, is that once the Bot hands the orders to TWS, they are live orders within TWS, and thus any disruptions such as a communications outage or a PC freezing have no impact on the orders. You don’t have to worry about resynching, or resubmitting orders, as they are live server side orders. The Bot communicates via the Interactive Brokers TWS API.

Trade-Ideas Oddsmaker: Oddsmaker is the software used to backtest any idea created with the Trade-Ideas product. You can test several exit strategies to verify if an idea is worth pursuing. Typically, I brainstorm for an idea then run it through the oddsmaker. If it shows promise, I will test several exit strategies, and if it makes it this far, it is a candidate for forward testing with the Bot. As a side note, the nice thing about using Interactive Brokers, is that they have a paper trading feature where you can test with real time data and fills. It will reject a short sale if shares are not available, account for slippage, etc.

Stocktickr Journal: I’ve written about stocktickr before, and this is where I log every single trade I make. It tracks all the stats I need to keep tabs on my trading systems such as expectancy, win rate, and net profit. Keeping a journal is one of the most important things you need to grow as a trader. I wrote an article a while back about how important keeping a journal is here.

* You can also configure the Bot to send signals to Medved’s Quotetracker software. I don’t currently use Quotetracker, but I can see this as a very useful feature.

To summarize, the basic requirements are using Interactive Brokers as your broker, subscribing to stocktickr.com and subscribing to the Trade-Ideas software.

I’ve been calling my bot Frankenstein and I brought him to life last week. So far it has been decent, with a gain of 4R’s in 3 days. More importantly, there have been no snags so far in live mode. There have been small issues here and there, mostly related to the bot logging the trades into the journal. The biggest issue I had in test mode was a trade that didn’t close, but that was a problem with AMEX executing the order and even canceling the orders and resubmitting manual orders didn’t work.

Of course there are pro’s and con’s regarding any product and some of the limitations with this setup are as follows:

At this point Interactive Brokers is the only supported broker. This was not an issue for me as this was my broker of choice anyways.

You can’t program your own strategy like in TradeStation, however, the ease of creating strategies trumps this limitation in my eyes.

There are no portfolio management options like limiting total capital used, although you can sort of rig it my limiting how many concurrent positions can be opened per strategy.

Some of the pros include:

Live orders at the broker.

Extensive statistics available with stocktickr.com

Very stable platform (all applications) with very fast executions from alert to journal entry.

Very inexpensive for having a complete trading BOT with no programming required.

I think anyone interested in building an ATS should check out this suite of tools. Through the affiliate links below, readers of downtowntrader.com can sign up for 7 day trials of Stocktickr and Trade-Ideas. Even if you have no interest in auto trading, each of these are spectacular products and deserve a test run.

Sign up here for your free trial of stocktickr.com

Sign up here for your free trial of Trade-Ideas

If anyone has specific questions regarding any of the tools, please feel free to post them in the comments section. If I don’t know the answer, I can forward the question to the respective companies.

Good Trading,

Joey

1 comments

  1. Willys // 12:18 PM