Friday, 16 December 2011

Happy Holidays

Last trading day of the year for me unless...........

It's been my best year yet! I am truly thankful and ever watchful.

The markets are still going through transition as the profiles of the players in the market evolve. The demise of the floor has had a considerable impact. I have a number of ex-floor guys as students who are making their own transitions to become electroniclocals, much as I did many years ago. I guess the writing on the wall in London's LIFFE market was writ bolder and bigger and I saw it.

2012 will see me moving even more down the autotrading route. While I will always trade as a discretionary trader, until I can't, I can see the writing on the wall again. Whether it's me with less focus or the markets transitioning, I believe that going algo will make more money in the long run for me. The more sporadic ebbs and flows are well suited to algos who can lie in wait for the picture they are designed to trade. Running a futures portfolio will even out the draw downs and allow me to use more capital than I can as a discretionary trader.

Yesterday's DAX trading had just 4 trades and made 2924 Euros per contract. A great day! Not all days are like that. Plenty of losing days and weeks but the months seem to be green, at least so far. See the stats from yesterday. I try and not look at fully auto algo performance during the day as I don't want to override trades or switch the algo off when I see losses. I must admit that it requires discipline and a firm decision to accept and rely on all the testing I did. The trade off is I'm free of my workstation and can take my iPad and check that the Internet connectivity to my cloud is intact.

Happy holidays to all and I wish you all a Happy New Year and a year of Great Trading!!! Finally, to those people stuck in the MFGlobal mess, I wish for you that it all works out and hope that the regulators ensure that such an event can not happen again. But I won't hold my breath on that one.


  1. Thanks for your great trading blog and best charts anywhere.

    I have a question.

    In your previous post on algos you said: "I also have the ability to have the algo stop trading once a daily profit (or loss) target has been met. This can increase the win rate of the algo too."

    If every trade is statistically independent of every other trade (e.g., the outcome of any particular trade can not be known before-hand even given the knowledge of previous trades), how can stopping at any particular profit (or loss) target effect the winning percentage?

    Happy Holidays.

  2. Anon 18:43. Thanks. If I optimise the best time to stop trading and it increases my profitability on a large sample of data then it works. I mostly use it to decide when is the best for an algo to trade. I can use it to create different algos for different times of day or not trade at certain times of day. I agree that the order in which winning and losing trades unfold is completely random but by blocking certain times as a result of hitting a profit target can mean not getting my share of losing trades that day.

  3. EL,

    Thanks again for so many useful insights.

    Question - would clearing through a firm that is not a broker / dealer reduce the risk of getting caught in an MF Global type of situation? My understanding is that only broker / dealer clearing firms trade their own book, so it seems that one that doesn't is inherently less of a risk in terms of client fund safety.

    Happy Holidays and New Year to you as well.


  4. Dave, it depends upon what risk you are avoiding. As it stands, it looks as if we have very limited protection against fraud by any broker. Certainly, if we know for sure that the broker does not trade then the risk is reduced but if their risk management is not good and a big client goes down in say, a flash crash, he can take part or all of the segregated client funds with him as clients are not segregated from each other.