3 ms·

It absolutely can be done. I know a handful of people who are doing well, or have spun a small hedge fund out of their DIY trading system. Having said that, it

It absolutely can be done. I know a handful of people who are doing well, or have spun a small hedge fund out of their DIY trading system. Having said that, it's hard. Most people simply don't have the bandwidth to do it properly. Parsing daily Yahoo prices and having a R script or two somewhere will absolutely not put you in the "I do successful algo trading" camp. Or running TradeStation with a handful of pair strategies or whatever. So I differentiate between them and people who write more serious automated algos. I'm sure in the first camp there are some that make profits, but as someone said here already, It's usually a zero sum game. Who are the more serious DIY traders? Hard to define but if they do most of those things I'd say they are in the small camp of home traders that often make money. - Willing to fork up the money for good historical intraday data (10 years of US intraday data from Nanex cost about USD 30K). I'm super serious about this, if people even blink an eye here, I'd walk away. They don't understand how important data is. - Build a proper security master database, or buy a security master feed. This is a project of blood sweat and tears. Every day securities need to be resolved. Again if building this out of, e.g., Bloomberg data, quite some money has to be invested. - Have a sophisticated back-test system where they can simulate models against MANY traded stocks concurrently. Meaning, they can back-test making decision tick by tick, or second by second, against a large universe of instruments, for example 3000 US stocks. This can be slightly eased by doing some daily preselection, but usually good strategies still scan hundreds of stocks real-time. - Have the ability to execute this stuff live. IMHO, the article is right to mention Interactive Brokers for this, they are one of the best in this kind of setup. (Only now are we where most people try to start) - Have the stats, math and dev chops to find and implement a profitable model/strategy. I have to say though, while still difficult, there are many untapped possibilities to make some money. But once decided on a general direction the "time to market" is still often at least half a year. Many give up before that... There are some more things I'd look for but this is the main list I'd say.

e15ctr0n 11y ago
> Or running TradeStation with a handful of pair strategies or whatever. You can now buy trading strategies from their TradingApp Store. Supposedly, they've been written by professional algorithmic traders. https://www.tradestation.com/trading-technology/tradestation-platform/extend/tradingapp-store https://www.tradestation.com/trading-technology/tradestation... https://tradestation.tradingappstore.com/search/all/Rating https://tradestation.tradingappstore.com/search/all/Rating
- Havoc 11y ago
  >Supposedly, they've been written by professional algorithmic traders And discarded by them as not profitable enough for their own use.
- gnaritas 11y ago
  No one sells a profitable algo in an app store, those are worthless other than as samples of how to buy and sell and read indicators.
- lukebuehler 11y ago
  This goes exactly against the point I'm making. Those strategies are not a bottom up system that combines a tailored infrastructure with sophisticated trading models. BOTH are needed, TradeStation is absolutely NOT a sophisticated infrastructure. And I doubt that the models are sophisticated enough to rake in alpha, especially in terms of execution. Maybe if you put in a little money you'll break even with the subscription cost. If you put in a lot, those systems will break down.
throwaway161803 11y ago
Intraday data is often unnecessary and, worse, leads otherwise intelligent people to trade on spurious relationships. Recall that a sufficient statistic for the drift of a Brownian (or geometric Brownian) price process over a period is its return over the period. Hence intraday data provides essentially no additional information on the drift of prices, though it is useful for measuring the strength of covariate relationships and responses to intraday events.
- lukebuehler 11y ago
  I did not say that the overall model must be built on intraday data. But most models will simply be useless without proper execution. And IMO, the model should be back-tested with simulating the transaction costs as close as possible. So the overall model might be fine and interesting, but if you can't close the loop with a proper execution model, which usually affects the overall model as well, you simply don't have much.

e15ctr0n 11y ago

> Or running TradeStation with a handful of pair strategies or whatever. You can now buy trading strategies from their TradingApp Store. Supposedly, they've been written by professional algorithmic traders. https://www.tradestation.com/trading-technology/tradestation-platform/extend/tradingapp-store https://www.tradestation.com/trading-technology/tradestation... https://tradestation.tradingappstore.com/search/all/Rating https://tradestation.tradingappstore.com/search/all/Rating

Havoc 11y ago
>Supposedly, they've been written by professional algorithmic traders And discarded by them as not profitable enough for their own use.
gnaritas 11y ago
No one sells a profitable algo in an app store, those are worthless other than as samples of how to buy and sell and read indicators.
lukebuehler 11y ago
This goes exactly against the point I'm making. Those strategies are not a bottom up system that combines a tailored infrastructure with sophisticated trading models. BOTH are needed, TradeStation is absolutely NOT a sophisticated infrastructure. And I doubt that the models are sophisticated enough to rake in alpha, especially in terms of execution. Maybe if you put in a little money you'll break even with the subscription cost. If you put in a lot, those systems will break down.

throwaway161803 11y ago

Intraday data is often unnecessary and, worse, leads otherwise intelligent people to trade on spurious relationships. Recall that a sufficient statistic for the drift of a Brownian (or geometric Brownian) price process over a period is its return over the period. Hence intraday data provides essentially no additional information on the drift of prices, though it is useful for measuring the strength of covariate relationships and responses to intraday events.

lukebuehler 11y ago
I did not say that the overall model must be built on intraday data. But most models will simply be useless without proper execution. And IMO, the model should be back-tested with simulating the transaction costs as close as possible. So the overall model might be fine and interesting, but if you can't close the loop with a proper execution model, which usually affects the overall model as well, you simply don't have much.