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Le Fly Has Made Passive Investing Great Again

Investing doesn’t get much more simple than what I am about to show you.

Le Fly, the architect behind Exodus, owner of time machine, iBC founder, and Space Alien Magician literally hand picks 15 stocks every six months.  He seeks growth, gentlemen, at a reasonable price.  Inside Exodus the portfolio is called GARP.

Year-to-date performance of the GARP index is a tad below 13% and if you use Motif (no affiliation just a great tool) you literally had to press 2 buttons this entire year to make said gains.

BEHOLD:

motif-post-election

The bulk of my ‘stock picking’ money was moved into a Motif account and relegated to the GARP portfolio after I swore off individual stocks.  This allowed me to pursue industry and hone my NASDAQ futures game.  I trade NASDAQ futures quite aggressively, in short spurts, which suits my attention span and cat-like speed.

Current conditions are top notch for taking 6, 9, 21 points home every day.  If I had to babysit a handful of stocks, my performance would suffer.

Le Fly, or Senor Tropicana as he’s known in the Bermuda triangle, had the foresight in June to adjust GARP for a transition into MAGA.  The result?  The index is sailing into year-end on the breeze of winship.

You may be asking yourself why you ever traded stocks.  The environment is tumultuous and everything seems to do the opposite of what you think.  Maybe this isn’t the case for you, but for me individual stock trading, on a short-term time frame, does not work.  However, outsourcing the R&D to someone with a decade more experience then myself and using his algorithms to time my adds does.

In short, long live GARP, long live Exodus, long live Le Fly.

 

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ALGO Afternoon

When the action gets fast, I put Elroi in charge.  At least, that is the plan.  He’s already 2 for 2 on the short side and the action is starting to get loose.

You best protect your necks folks, algos love a fast market.

UPDATE: Elroi’s Friday afternoon trades:

Elroi_03212014

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Retooling

I completed a micro test today of observing and navigating the morning trade and then turning my focus to more pressing matters like driving around in the sunshine.  But how does one cope with the potential for missed opportunity?

When the daily ranges on the NASDAQ are blowing out like this, as they have all week, there is money to be had by providing and obliging the order flow.  All of that range has some lovely meat on the bone.  As a swing trader, I am slowly building into names I want for a few months, buying.  As an order flow trader however I had zero desire to go long today.  That is because the day after a trend day favors the direction of the trend.  Thus trades should be taken in the direction of the prior day trend.  But the devil is in the details, yes?

Getting short can be challenging because if your timing is off the market will blow a geyser of buy orders up your rectum.  Think of it like the market getting an enema before the action really gets loose.

We will discuss all these topics, and more over the weekend in our first edition of Opening Swing, a study of how the market opens and the opportunities it presents.

I just don’t know if I will feel right avoiding afternoon trade.  I have discussed my concern with my helper robot, Elroi, who seems to think he is up to the task of trading the afternoon.  I will tell you this, Elroi is one blood thirsty robot.  It is a beast forged in Baalzebûb’s furnace who thrives when markets are liquidating.  Especially in the afternoon apparently.  He went 4-for-4 while I was out procuring cured meats and beer today.  He may just be the tool needed to curb  my urge to stalk the markets minute-for-minute.  I have a pretty good idea when to turn him on, too, but that I am keeping close to chest.  Check out today’s beta performance per a hypothetical one contract position:

Elroi_Perf_14March

I bought more GOGO today and did little else.  I like cash even if we bounce because it makes hunting new deals that much more important.

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Algos Love This Market

The headlines always talk about high frequency trading algos and their demonic effects to the marketplace, they give no love to the medium frequency algos.

My algo, codename Elroi, is a medium frequency algo that currently trades the NASDAQ futures.  This is occurring in beta, something I began building the last time volatility perked up.  I wanted this algo in fighting form for a year I imagine will be fast.

My algo is built for speed.  In fact, it needs ultra violence to perform properly.

Check out this week’s (on a 1 contract basis) performance:

Elroi_Perf_MidMarch

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You Are Not Doing It Right

I love when people misuse a technology to the point of frustration until they criticize it as being broken or even stupid.  The results can be significantly more amusing when the technology is mechanical, like hands free faucet, because you get a very tangible experience of human failure.  I long ago swallowed the pill and accepted that we are servants to our technology unless we reach the status of robot overlord.  Once robot overlord status is achieved, one becomes something much more powerful—a small cog in the process, the invisible ghost who directs the technology with symphonic harmony.  This should result in my success in breaking the traditional 30 year work mold and liberating my time to explore other life interests.

Anyhow, I was frustrated with my computer processing power all week and trading naked and without robots.  The reason was a new bit of trading logic which I bolted together and unleashed on 2.5 years of data for backtesting/optimization purposes.  After 94 hours of peaked i7 quad-core processing I was delivered the output, which looked like this:

000000000000000000 00000000 0000000000000000000000000 0 0 0 000000000000000000 0 00000 0000000000000 0      0000000000000000000       0000000000000 0 0 00000000000000 0 000000000

I did it wrong.

And in that moment, rather this entire last week, I learned a lesson about coding logic and testing and life in general.  Before you strap on a jet pack and attempt to cross the Grand Canyon, go hop the drainage ditch in your back yard.  You can work the kinks out much quicker and safer.

I worked out the kinks and tested the logic on 20 days of data to make sure it was working correctly.  Now I am back in the lab, peaking out the processors.  This time, with a bit more thought and proper use of the technology, I can test out 2.5 years of data in 56 minutes.  LOL

Failing is learning, but if you want to shorten the learning curve, spend a few minutes talking with someone who has expended their life years already failing in the same field.

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Keep Moving

A good week was had by most, we traded, we faded, and things got a bit obfuscated when too many signals started crossing.  Elroi took a winning trade this morning at 4 am while I still fake sleeping.  I would pull a screenshot but I have been saddled with a criminal amount of work into Friday afternoon.

While many of you signoff and return to your beer bottle, I have entered perhaps the third inning of what promises to be a long and eventful weekend of labor.  Such is the ramification of spending the trading hours glued to your terminal, talking smack on the interwebs.  Pair that with a surprise audit and your weekend plans all take a rain check.

However, this is the arctic north, and the weather does nothing to inspire one, thus why not work my fingers to the bones while dreaming of tropic wonders?  I will make my escape from this wretched climate soon enough.

I made some pesos this week.  I gave a small bit back today but considering the type of crack rock I hold in my ranks, I chalk today up as a big victory.

The market sold off into the bell, I think, I stopped paying attention to be perfectly honest.  My charts looked safe enough to file away and get back to real work.

Top picks into next week: FB, ACAD (new long, Feb 26 calls), and YELP (I need to buy this still)

My Lulu stretchy pants are sagging at the inseam after excessive squat jumps.  This may have been an overzealous knife catch attempt.

I have to get back to work.  I will get back to you internet people later. Be well.

FINAL NOTE: I heeded our Chief Market Strategist’s caution and raised some cash.  I am 33 percent cash.

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Never Waste a Good Tragedy

Yesterday was my worst one day loss since I began trading.  To be blunt, it sucked.  I have broken my diversification rules and exposed myself excessively to the LED industry.  I haven’t adjusted this yet, because I have the conviction of a lunatic.

After spoiling myself with iron work after the bell, I had tones of energy.  Pair that with the massive flesh wound the market opened up and I had the motivation to recode and recalibrate Elroi on the NASDAQ using my new delicious and powerful data.  I have built a beast algo and guess what?  Elroi thrives in volatility and “gets by” profitably the rest of the time.  Aka, he’s built to earn coin while longs get roasted and does so nearly 24 hours/day.

Why am I telling you all this?  Do I intend to sell said algo to you, the internet?  Goodness no.  I built a machine that I put $2000 into and it pays my mortgage.  Exercise induced insomnia and a financial tragedy were the spark that rebuilt Elroi better than ever.  Stat heads, behold the glory:

ElRoi_TTA

ElRoi_SPS

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Better Suited for Robots

The index futures are trading all over the place, and I find myself trading well in the morning only to give back my gains come the afternoon.  I brought Elroi over to the /NQ with me this week because I need to keep my eye on the jackass in case he does something stupid—which he does from time to time because my coding skills are a bit…meh.

My algo loved today and had its best day ever.  However I sullied all of my morning discretionary profits and much of Elroi’s algorithmic profits by flip flopping in the chop.  80% of my trading errors occur when the market churns.  My exponential moving averages converge, my Keltner channel goes sideways, and price chops at like 1000 miles per hour.  And I go, “shorts have this, SELL SHORT on the breakdown.  OH FUCK it’s a fake out, COVER, here come the longs, FUCKIN’ BUY’EM UP, SLAAAMMMMM, back down.”  I used to do this a good 4 or five times before I snapped out of my insanity.  Now it takes two bad trades for me to realize I am a jackass and sit on my hands.

The problem is the market did that to me twice this afternoon.  Lol, I am leaving that sentence because it speaks volumes to my mistake.  The market did nothing to me, I only did these things to myself.  I review these conditions all the times.  I know to stay away.  In the morning, I do.  In the afternoon I loosen my focus a bit.  I will go through my trades and verify this tendency but I smell a “no afternoon” rule brewing up.

 

Here are Elroi’s trades:

Elroi_NQ

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Shrinking Targets Ahead of The Fed

My journal work these last two weeks brought attention the fact that I had been nailing my entries, but getting stuck in trades, losing interest, and then just managing to scratch them and lose a few bucks.  I think this behavior was a byproduct of our coiling markets ahead of the Fed.

What worked really well this morning was taking smaller profits.  Thus far I have taken three wins in the futures: two in the spooz and one in the 6E.  I would still be in two of these trades, contemplating scratching them for losses, had I not lowered my profit expectations by one to two ticks. 

This is adapting, this is surviving.  You must be one with the flow, one with your environment.  I strongly believe once the market gets some visibility (after the reaction to the Fed reaction) we will return to an environment where I can push my profit expectations back to their planned levels.

I cut EXK, no other portfolio adjustments.

Be amorphous, like water.  And stay calm if the market gets wiry around 2pm.  Perhaps listen to The Buena Vista Social Club:

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Rolling Into The Weekend

I came into the day completely unprepared for all the volume to roll into December contracts.  As a result, I spent the morning getting all of my charts built.  By the time I completed this task the only opportunities of the day had come and gone.  After watching the tape for a bit, I ordered an oversized lunch and stared out the window while eating it.

There just isn’t much for me to do today.

RBCN caught an upgrade but some the bounce if being faded off.  I get the sense this stock is setting up to offer long speculators another correction, but I’m struggling to justify selling my shares for any other reason. I will stick around for the flop Monday.

I can’t justify selling SKF either.  Aside from the Goldman Dow inauguration, financials have sucked wind all week while tech goes on a no holds cocaine bender.  Look at WFC, BRK/B, C, BAC, and the butt grabbers at AIG.  They all performed rather lame.

It helps me carry high beta through the weekend, too.

I will stick with EXK into the weekend.  It could either carve another 6-7% off me or rip tits higher.  I like that type of binary situation.

Enjoy the final throws of summer this weekend.

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