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This is a decent first-steps guide into analyzing historical trading data. With resources like Quandl, QuantConnect, etc continuing to improve, hopefully we wi

by wc- 9y ago

This is a decent first-steps guide into analyzing historical trading data. With resources like Quandl, QuantConnect, etc continuing to improve, hopefully we will see more and more people diving into the data. That being said, the "todos" at the end of this article kind of understate just how much work is left to be done before a strategy like this could be put into production. Ignoring the actual viability of a simple moving average cross signal, you could have the best strategy out there but would never stand a chance without significant time and effort committed to the execution and risk management sides of automated trading. If building trading systems in the crypto world is something that interests you feel free to reach out to me, company / contact info is in my HN profile.

nxsynonym 9y ago
Here's a question I've had for a while regarding trading systems in the cryptocurrency world -- What's the end goal? Would a perfect trading system fully automate the trading process to maximize returns, or is the goal to develop the best tool to assist a trader? I'm curious what you, as someone in the field of developing these systems, see as the "ideal product". As a follow up question, what would happen to a market that is 100% traded automatically (assuming thats possible and the end-goal) - would become stagnant? Forgive my ignorance if any of this is obvious, my econ/trading knowledge is next to 0.
- wc- 9y ago
  Just like in traditional markets there are all kinds of applications. Some devs might be building tools to assist human traders, some might be working on market making / liquidity providing, some might be working on execution algos for the various funds that have popped up. My ideal product is very different from someone else's, it just depends on what your business model is. For the follow up question, I would suggest looking at the rise of automated trading in traditional markets. It is an overwhelmingly large % of trades and market activity these days, and I would call the largest financial markets in the world anything but stagnant. The more players and liquidity in a market, the more efficient the price discovery can be, which I think would be a very good thing for the long term viability of crypto markets. I guess to summarize, the crypto markets are not much different from traditional markets and getting more similar every day.
- gricardo99 9y ago
  I'm not exactly sure what you're asking. What's the goal of building a trading system? As someone who's worked on trading systems in a professional setting I'll give some thoughts. First and foremost the goal is to make money. I guess some people build these systems for fun/hobby or for the challenge/educational value. But huge amounts of money are spent on trading systems, with the goal that they increase profitability. Sometimes that means maximizing returns, sometimes that means assisting traders. This is a very large market, with very diverse types of end-users. I believe crypto is similar, but a microcosm of the broader trading environment (with some of its own cyrpto-specific idiosyncrasies). You have some "HFT" traders, "institutional", HODLERs, etc... Each has different objectives and skill sets. A trading system has a different value proposition for each trader's needs and objectives. In terms of a 100% automated market, that's an interesting question. The biggest world markets are very highly automated, such as the equities market. Google "hft percentage of volume" and you'll find various sources claiming up to 70% of the equities volume is HFT. Since HFT trades complete in micro-seconds, this is fully automated trading. The Flash crash was partially blamed on a high-level of automation, were a trader was trying to game the response to large orders[1]. I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. 1 - https://www.bloomberg.com/view/articles/2015-04-21/guy-trading-at-home-caused-the-flash-crash https://www.bloomberg.com/view/articles/2015-04-21/guy-tradi...
  - bduerst 9y ago
    >I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. Which is because the automation isn't capable of fully gaming itself yet. In game theory, you don't have to be the smartest person in the room, you just have to know what everyone else is going to do. In a ~100% automated market, whoever can identify the patterns emergent from the automated rules will be able to beat the automation.
  - notyourgrandma 9y ago
    What do you think of db's recent decision to open-source their trading platform? https://www.db.com/newsroom_news/2017/deutsche-bank-makes-its-computer-code-publicly-available-for-the-first-time-en-11674.htm https://www.db.com/newsroom_news/2017/deutsche-bank-makes-it...

by wc- 9y ago

nxsynonym 9y ago

Here's a question I've had for a while regarding trading systems in the cryptocurrency world -- What's the end goal? Would a perfect trading system fully automate the trading process to maximize returns, or is the goal to develop the best tool to assist a trader? I'm curious what you, as someone in the field of developing these systems, see as the "ideal product". As a follow up question, what would happen to a market that is 100% traded automatically (assuming thats possible and the end-goal) - would become stagnant? Forgive my ignorance if any of this is obvious, my econ/trading knowledge is next to 0.

wc- 9y ago
Just like in traditional markets there are all kinds of applications. Some devs might be building tools to assist human traders, some might be working on market making / liquidity providing, some might be working on execution algos for the various funds that have popped up. My ideal product is very different from someone else's, it just depends on what your business model is. For the follow up question, I would suggest looking at the rise of automated trading in traditional markets. It is an overwhelmingly large % of trades and market activity these days, and I would call the largest financial markets in the world anything but stagnant. The more players and liquidity in a market, the more efficient the price discovery can be, which I think would be a very good thing for the long term viability of crypto markets. I guess to summarize, the crypto markets are not much different from traditional markets and getting more similar every day.
gricardo99 9y ago
I'm not exactly sure what you're asking. What's the goal of building a trading system? As someone who's worked on trading systems in a professional setting I'll give some thoughts. First and foremost the goal is to make money. I guess some people build these systems for fun/hobby or for the challenge/educational value. But huge amounts of money are spent on trading systems, with the goal that they increase profitability. Sometimes that means maximizing returns, sometimes that means assisting traders. This is a very large market, with very diverse types of end-users. I believe crypto is similar, but a microcosm of the broader trading environment (with some of its own cyrpto-specific idiosyncrasies). You have some "HFT" traders, "institutional", HODLERs, etc... Each has different objectives and skill sets. A trading system has a different value proposition for each trader's needs and objectives. In terms of a 100% automated market, that's an interesting question. The biggest world markets are very highly automated, such as the equities market. Google "hft percentage of volume" and you'll find various sources claiming up to 70% of the equities volume is HFT. Since HFT trades complete in micro-seconds, this is fully automated trading. The Flash crash was partially blamed on a high-level of automation, were a trader was trying to game the response to large orders[1]. I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. 1 - https://www.bloomberg.com/view/articles/2015-04-21/guy-trading-at-home-caused-the-flash-crash https://www.bloomberg.com/view/articles/2015-04-21/guy-tradi...
- bduerst 9y ago
  >I think a 100% automated market would collapse. Even the 70% automated market of equities has shown some scary positive feedback loops that need human intervention. Which is because the automation isn't capable of fully gaming itself yet. In game theory, you don't have to be the smartest person in the room, you just have to know what everyone else is going to do. In a ~100% automated market, whoever can identify the patterns emergent from the automated rules will be able to beat the automation.
- notyourgrandma 9y ago
  What do you think of db's recent decision to open-source their trading platform? https://www.db.com/newsroom_news/2017/deutsche-bank-makes-its-computer-code-publicly-available-for-the-first-time-en-11674.htm https://www.db.com/newsroom_news/2017/deutsche-bank-makes-it...