9 ms·

Real money, invested with algorithms

165 points by twiecki 13y ago

ForHackernews 13y ago
Sweet. This is perfect for those of us who still have some money we didn't put into MtGox left to lose!
junto 13y ago
I'd love to have a go at this but I haven't a clue where to even start. Any tips as to where I should start reading?
- justincormack 13y ago
  Don't.
  - ndr 13y ago
    That's quite harsh, would you mind to elaborate?
    - ForHackernews 13y ago
      At best, your naive algorithms will under-perform market indices (especially after trading fees). At worst, you'll lose all your money.
    - nevi-me 13y ago
      I know very few traders who have either gone mechanical or semi with their own money. It's less about the algorithms, but more about discipline, intuition and knowledge. All of the traders that I mention knowing, are actuaries, who still spend a lot of time working on their models, always backtesting and most importantly, spending a lot of time on risk management, because futures are unpredictable like the future. I tried trading. Reality is that if I have $10'000 to trade, unless I am successful, which is likely a low probability; 10% of that goes to brokers for all the spreads I pay over time, and the other 90% simply goes to another man/woman/company's pockets. The one thing that I discounted was the adrenaline rush in seeing a certain currency pair or index go up by a few bips in a matter of milliseconds and that translating into gains/losses in my account. If you do it to 'try' it out, stay away. If you don't understand the effect of a certain EMA converging/whatevering with another EMA, stay out. If Bollinger rings of a friend's surname more than a band, stay out. etc. To even be extreme, I would equate high-leverage trading to gambling for us folk who don't have a lot of knowledge, and I'd go further and equate it to drugs for those who have less of a clue. As the parent post said, stick to value investing. Disclaimer: I've spent about 6 years trading in my spare time, learnt lots etc. but called it quits 3 years back to focus on something better with my time. I'm currently 10e10/4-.5 years old.
    - justincormack 13y ago
      The guy "hasn't got a clue". Basically, inventing random algorithms (even if they back test ok) is a good way of losing all your money. Fundamentally, there are people who write algorithms based on past prices, largely trend following. They generally think they are doing well, without realising that they are making money by being generally long a rising market. Then they lose it all. Then there are the other people who have inside information, largely details of other peoples trades they can front run. They generally make money over the long run. You are not them.
  - gbasin 13y ago
    If he doesn't, who will line my HFT pockets?
- adeychi 13y ago
  To get started on Quantopian, take a look at the FAQ (https://www.quantopian.com/faq https://www.quantopian.com/faq) and help documentation (https://www.quantopian.com/help https://www.quantopian.com/help). The platform runs entirely on Python and supports US stocks and equities. To begin coding, clone the sample algorithm on the front page to get familiarized with the IDE. You can then backtest the strategy, for free, using historical data from 2002 - Now. When you run a full backtest, you can see how your algorithm would have performed in the past - you can see your returns, Sharpe ratio, and other metrics. Once you're comfortable with the syntax and mechanisms, the community is a great place to look for trading ideas to try on your own. Try cloning an algorithm posted in a thread to begin experimenting. If you get stuck, post to the forums - they're a friendly bunch and will be happy to help out. Of course, past performance is not indicative of future results. When you're ready, you can paper-trade your algo (trade using fake money) on the live market. It's free on Quantopian and a risk-free method to see how your algo performs in the market. And then, the last step is to connect your account to Interactive Brokers and begin live trading with real money. This blog post was an update of the live trading pilot program. (Disclaimer: I work for Quantopian. But I'd be happy to help answer any questions! Feel free to reach out to us directly as well, feedback@quantopian.com)
  - wagerlabs 13y ago
    How does Quantopian connect to IB? Doesn't IB require a local TWS connection as well as credentials, e.g. 2-factor authentication?
    - adeychi 13y ago
      We run an IB gateway and in the Quantopian UI you enter your IB credentials - but we do not store your password. You then deploy your algo and see a dashboard with updates from the market. Fore more info see: https://www.youtube.com/watch?v=hye1L86s43M https://www.youtube.com/watch?v=hye1L86s43M
  - onion2k 13y ago
    Great site. Do you know of anything similar for the UK? It looks like a lot of fun to play with.
IBM 13y ago
Stick with value investing (or index investing if you don't have the skill/discipline/time for it).
- deleted 13y ago
  [deleted]
- gnaritas 13y ago
  In other news, the sky is blue. C'mon man, make a useful comment about the site, not just some generic and completely unrelated investment advice.
- minimax 13y ago
  You could try and write an algo that would carry out your value investing strategy. You could trawl Yahoo for P/E or whatever value metrics you want to look at buy or sell based on certain thresholds.
  - gbasin 13y ago
    Successfully implementing a value strategy cannot be codified into an algo EDIT: There are just too many exceptions and nuances. Every single investment involves more exceptions and nuances that would need to be coded. And if you don't think so, I would bet you don't have alpha :)
    - nissimk 13y ago
      I guess I'm agreeing with your statement "Successfully," but it doesn't mean it hasn't been tried: http://www.jatit.org/volumes/Vol51No1/24Vol51No1.pdf http://www.jatit.org/volumes/Vol51No1/24Vol51No1.pdf Also, weren't the quant funds that were involved in the summer 2007 blowup all running automated value strategies based on Fama+French factor models? It works really great until it doesn't.
      - gbasin 13y ago
        Oh plenty of tryers. Value investing is a lot harder than it looks. And what you're talking about isn't really the definition of value investing (like graham-dodd + infinite details on the individual companies). Those quant funds were running factor models and mid-frequency stat arb
aleyan 13y ago
Congratulations to the quantopian team. Trading on real data is very different from simulated trading on historic data. There are a lot of leaky abstractions and assumptions that happen during simulations that cause problems once you put real money to work. In the past, here on HN, I have criticized quantopian several times because no one has actually used quantopian to trade real money. This is no longer true. It will take a lot of time and a lot more capital to figure out all the holes, but they are finally on the right track and I am glad they have 20 people already trading. That is 20 sets of eyes balls to look for lack of fidelity in the simulations. Personally I am interested to see how good their transaction cost model is when trading hundreds to thousands of shares at a clip.
- noname123 13y ago
  Yes, 1000x! I'm waiting to see Quantopian's forward testing with results. Personally, I couldn't wait for their roll-out. So I wrote my own IB client and traded my Quantopian backtested strategies myself on my IB test account. Race condition, deadlocks much at 3:59PM ET at 2000+/msg burst from quote ticks (esp. when you are doing some kind of stat arb, pairs trading where one order submission is dependent on another order's fill). Anyways interesting technical problems abound. Gl to the Quantopian team!
- novaleaf 13y ago
  very interesting!!! but I'd like to try writing my own algorithm offline, in my own prefered language. (javascript) does anyone know where I can get price history for the last few years for something like an index fund, like DIA?
  - wkneepkens 13y ago
    Yahoo Finance is a good option, also have an API.
    - novaleaf 13y ago
      thanks, i'll give that a try
citanul 13y ago
It seems the natural next step would be to allow non-algorithm writers to invest in algorithms (or a bundle of algorithms), with some fee going to either or both Quantopian or the writer of the algorithm(s). Any chance that's on the roadmap, and if so, when can I expect to be able to crowdsource my investing?
- eclipxe 13y ago
  If only there was some way to invest in an index of some sort of the best algorithms...
  - nicolethenerd 13y ago
    But what you don't get with an index (at least, I don't think you do? I admit my ignorance on this) is the sort of transparency and ability to dig deep into the algorithm(s) that it appears you'd get with something like Quantopian. And possibly the ability to tweak that algorithm. Basically, a market for starter Quantopian algorithms that are more advanced than the samples on the site - I think that's vastly different than an index, and I could see paying for something like that.
    - yarou 13y ago
      Sure you do. All index funds disclose their holdings, and index ETFs show their constituent equities, along with any tracking error from the index being tracked. A long time ago, "proprietary" traders would perform index arbitrage in this fashion.
    - cpwright 13y ago
      If there were decent algorithms that third parties could dig into, then the opportunity would go away.
- Ecio78 13y ago
  You mean something like http://www.collective2.com/ http://www.collective2.com/ ? One of the difference is that on c2 you can't see the internals of the algo (because it could also be not an algo but somebody deciding how to invest, actually the algo is not implemented on the site but outside, the site only receives buy/sell commands). on Techzing podcast can find and interview to the founder (a bit old, 2011): http://techzinglive.com/page/868/155-tz-interview-mathew-klein-collective2 http://techzinglive.com/page/868/155-tz-interview-mathew-kle...
gbasin 13y ago
Some other commenters have hinted at this but... I feel sad whenever people build this kind of stuff. It's probably a very well built product (or will be) and is better than the alternatives out there, but the unfortunate fact is that anything that enables and encourages active trading in modern financial markets is setting 99% of their customers up for failure. And the 1% that are actually on to something will quickly move off the platform onto their own, or will end up losing whatever they make when their strategy loses whatever alpha it has and they can't admit it (I've seen this happen, but never the former, actually). Trading is hard. I run a proprietary trading firm with modern technology infrastructure and we have a lot of trading experience. You really have very little chance of success unless you're doing this full time, and even then it will take years before you have enough experience to build a sustainable income.
- yarou 13y ago
  In other words, there's no easy way to get rich. There is always pain involved, and people looking to get rich quick in financial markets are probably better off learning how to play poker.
  - breischl 13y ago
    Because playing poker is a much easier way to make a sustainable income! Hm... actually, it might be. At the very least you certainly don't have to shell out as much for software.
    - gizmo686 13y ago
      Also, in zero sum games like poker and investing, the real question is how much better then the competition you are. In investing, you are up against some really good competition. In poker, you can play against a lot of recreational players, who are could be far less skilled then you. With online poker, you can play many low value hands in parallel to get even easier competition.
      - gnaritas 13y ago
pontifier 13y ago
This is quite interesting. I had just built a predictive rebalancing bot to trade on MtGox a few hours before it collapsed. I was rebalancing every 60 seconds and making lots of trades. I only got a couple of hours of run time before it stopped working :( Here's the bot I built: https://github.com/pontifier/rebalancer https://github.com/pontifier/rebalancer Quantopian looks interesting, and hopefully the exchanges it trades on won't disappear.
- gedrap 13y ago
  Doubt that. NYSE is definitely a scam. I have heard they pivoted from creating a new social network, like Facebook just better.
jgh 13y ago
I've really enjoyed playing with Quantopian, and I think that I will continue to play with it as an educational tool. However my algorithms so far have been very good at losing an awful lot of money, so I think I will be sticking with simulations for now :)
- lucisferre 13y ago
  > my algorithms so far have been very good at losing an awful lot of money But... the solution is just so obvious, just make the algorithm trade the opposite of what it would have done. Pure profit!
  - xerophtye 13y ago
    haha! So... if the algorithm thinks a stock will rise, go short instead and vice versa?
  - nick_dm 13y ago
    A few years ago I heard a story from an acquaintance working at an online spread betting company. One senior figure suggested that they should actively bet against their worst performing customers rather than hedging, they discovered pretty quickly that this wasn't a good idea!
    - seunosewa 13y ago
      What happened when they tried it?
EGreg 13y ago
For the next week my comments on Hacker News -- except this one -- will attempt to garner as many points as possible by exploiting various HN tendencies. Feel free to upvote this comment if you think this is cool btw :)
watermarkcamera 13y ago
can I add comment ?
vijucat 13y ago
I've always found https://www.quantconnect.com/ https://www.quantconnect.com/ more interesting. They're just not as good as Quantopian at generating some buzz.
monksy 13y ago
The only issue that I have with that is that they require an IB account. That has a min of $10k. Thats not exactly easy to come by.
- cpwright 13y ago
  If you don't have $10,000 to risk, you probably shouldn't attempt to trade in an automated fashion. You need enough capital, because any one trade is likely to have a small percentage upside and you need to turn it over frequently.
Ecio78 13y ago
For those interested in doing some algo testing I found this site quite interesting: http://systematicinvestor.wordpress.com/ http://systematicinvestor.wordpress.com/
agilebyte 13y ago
Can anyone in the know tell me why traders are not interested more in sports betting? Seems like you have a lot more people betting with heart then brain which should result in a profit if you employ all your fancy algorithms no?

165 points by twiecki 13y ago

ForHackernews 13y ago

Sweet. This is perfect for those of us who still have some money we didn't put into MtGox left to lose!

junto 13y ago

I'd love to have a go at this but I haven't a clue where to even start. Any tips as to where I should start reading?

justincormack 13y ago
Don't.
- ndr 13y ago
  That's quite harsh, would you mind to elaborate?
  - ForHackernews 13y ago
    At best, your naive algorithms will under-perform market indices (especially after trading fees). At worst, you'll lose all your money.
  - nevi-me 13y ago
    I know very few traders who have either gone mechanical or semi with their own money. It's less about the algorithms, but more about discipline, intuition and knowledge. All of the traders that I mention knowing, are actuaries, who still spend a lot of time working on their models, always backtesting and most importantly, spending a lot of time on risk management, because futures are unpredictable like the future. I tried trading. Reality is that if I have $10'000 to trade, unless I am successful, which is likely a low probability; 10% of that goes to brokers for all the spreads I pay over time, and the other 90% simply goes to another man/woman/company's pockets. The one thing that I discounted was the adrenaline rush in seeing a certain currency pair or index go up by a few bips in a matter of milliseconds and that translating into gains/losses in my account. If you do it to 'try' it out, stay away. If you don't understand the effect of a certain EMA converging/whatevering with another EMA, stay out. If Bollinger rings of a friend's surname more than a band, stay out. etc. To even be extreme, I would equate high-leverage trading to gambling for us folk who don't have a lot of knowledge, and I'd go further and equate it to drugs for those who have less of a clue. As the parent post said, stick to value investing. Disclaimer: I've spent about 6 years trading in my spare time, learnt lots etc. but called it quits 3 years back to focus on something better with my time. I'm currently 10e10/4-.5 years old.
  - justincormack 13y ago
    The guy "hasn't got a clue". Basically, inventing random algorithms (even if they back test ok) is a good way of losing all your money. Fundamentally, there are people who write algorithms based on past prices, largely trend following. They generally think they are doing well, without realising that they are making money by being generally long a rising market. Then they lose it all. Then there are the other people who have inside information, largely details of other peoples trades they can front run. They generally make money over the long run. You are not them.
- gbasin 13y ago
  If he doesn't, who will line my HFT pockets?
adeychi 13y ago
To get started on Quantopian, take a look at the FAQ (https://www.quantopian.com/faq https://www.quantopian.com/faq) and help documentation (https://www.quantopian.com/help https://www.quantopian.com/help). The platform runs entirely on Python and supports US stocks and equities. To begin coding, clone the sample algorithm on the front page to get familiarized with the IDE. You can then backtest the strategy, for free, using historical data from 2002 - Now. When you run a full backtest, you can see how your algorithm would have performed in the past - you can see your returns, Sharpe ratio, and other metrics. Once you're comfortable with the syntax and mechanisms, the community is a great place to look for trading ideas to try on your own. Try cloning an algorithm posted in a thread to begin experimenting. If you get stuck, post to the forums - they're a friendly bunch and will be happy to help out. Of course, past performance is not indicative of future results. When you're ready, you can paper-trade your algo (trade using fake money) on the live market. It's free on Quantopian and a risk-free method to see how your algo performs in the market. And then, the last step is to connect your account to Interactive Brokers and begin live trading with real money. This blog post was an update of the live trading pilot program. (Disclaimer: I work for Quantopian. But I'd be happy to help answer any questions! Feel free to reach out to us directly as well, feedback@quantopian.com)
- wagerlabs 13y ago
  How does Quantopian connect to IB? Doesn't IB require a local TWS connection as well as credentials, e.g. 2-factor authentication?
  - adeychi 13y ago
    We run an IB gateway and in the Quantopian UI you enter your IB credentials - but we do not store your password. You then deploy your algo and see a dashboard with updates from the market. Fore more info see: https://www.youtube.com/watch?v=hye1L86s43M https://www.youtube.com/watch?v=hye1L86s43M
- onion2k 13y ago
  Great site. Do you know of anything similar for the UK? It looks like a lot of fun to play with.

IBM 13y ago

Stick with value investing (or index investing if you don't have the skill/discipline/time for it).

deleted 13y ago
[deleted]
gnaritas 13y ago
In other news, the sky is blue. C'mon man, make a useful comment about the site, not just some generic and completely unrelated investment advice.
minimax 13y ago
You could try and write an algo that would carry out your value investing strategy. You could trawl Yahoo for P/E or whatever value metrics you want to look at buy or sell based on certain thresholds.
- gbasin 13y ago
  Successfully implementing a value strategy cannot be codified into an algo EDIT: There are just too many exceptions and nuances. Every single investment involves more exceptions and nuances that would need to be coded. And if you don't think so, I would bet you don't have alpha :)
  - nissimk 13y ago
    I guess I'm agreeing with your statement "Successfully," but it doesn't mean it hasn't been tried: http://www.jatit.org/volumes/Vol51No1/24Vol51No1.pdf http://www.jatit.org/volumes/Vol51No1/24Vol51No1.pdf Also, weren't the quant funds that were involved in the summer 2007 blowup all running automated value strategies based on Fama+French factor models? It works really great until it doesn't.
    - gbasin 13y ago
      Oh plenty of tryers. Value investing is a lot harder than it looks. And what you're talking about isn't really the definition of value investing (like graham-dodd + infinite details on the individual companies). Those quant funds were running factor models and mid-frequency stat arb

aleyan 13y ago

Congratulations to the quantopian team. Trading on real data is very different from simulated trading on historic data. There are a lot of leaky abstractions and assumptions that happen during simulations that cause problems once you put real money to work. In the past, here on HN, I have criticized quantopian several times because no one has actually used quantopian to trade real money. This is no longer true. It will take a lot of time and a lot more capital to figure out all the holes, but they are finally on the right track and I am glad they have 20 people already trading. That is 20 sets of eyes balls to look for lack of fidelity in the simulations. Personally I am interested to see how good their transaction cost model is when trading hundreds to thousands of shares at a clip.

noname123 13y ago
Yes, 1000x! I'm waiting to see Quantopian's forward testing with results. Personally, I couldn't wait for their roll-out. So I wrote my own IB client and traded my Quantopian backtested strategies myself on my IB test account. Race condition, deadlocks much at 3:59PM ET at 2000+/msg burst from quote ticks (esp. when you are doing some kind of stat arb, pairs trading where one order submission is dependent on another order's fill). Anyways interesting technical problems abound. Gl to the Quantopian team!
novaleaf 13y ago
very interesting!!! but I'd like to try writing my own algorithm offline, in my own prefered language. (javascript) does anyone know where I can get price history for the last few years for something like an index fund, like DIA?
- wkneepkens 13y ago
  Yahoo Finance is a good option, also have an API.
  - novaleaf 13y ago
    thanks, i'll give that a try

citanul 13y ago

It seems the natural next step would be to allow non-algorithm writers to invest in algorithms (or a bundle of algorithms), with some fee going to either or both Quantopian or the writer of the algorithm(s). Any chance that's on the roadmap, and if so, when can I expect to be able to crowdsource my investing?

eclipxe 13y ago
If only there was some way to invest in an index of some sort of the best algorithms...
- nicolethenerd 13y ago
  But what you don't get with an index (at least, I don't think you do? I admit my ignorance on this) is the sort of transparency and ability to dig deep into the algorithm(s) that it appears you'd get with something like Quantopian. And possibly the ability to tweak that algorithm. Basically, a market for starter Quantopian algorithms that are more advanced than the samples on the site - I think that's vastly different than an index, and I could see paying for something like that.
  - yarou 13y ago
    Sure you do. All index funds disclose their holdings, and index ETFs show their constituent equities, along with any tracking error from the index being tracked. A long time ago, "proprietary" traders would perform index arbitrage in this fashion.
  - cpwright 13y ago
    If there were decent algorithms that third parties could dig into, then the opportunity would go away.
Ecio78 13y ago
You mean something like http://www.collective2.com/ http://www.collective2.com/ ? One of the difference is that on c2 you can't see the internals of the algo (because it could also be not an algo but somebody deciding how to invest, actually the algo is not implemented on the site but outside, the site only receives buy/sell commands). on Techzing podcast can find and interview to the founder (a bit old, 2011): http://techzinglive.com/page/868/155-tz-interview-mathew-klein-collective2 http://techzinglive.com/page/868/155-tz-interview-mathew-kle...

gbasin 13y ago

Some other commenters have hinted at this but... I feel sad whenever people build this kind of stuff. It's probably a very well built product (or will be) and is better than the alternatives out there, but the unfortunate fact is that anything that enables and encourages active trading in modern financial markets is setting 99% of their customers up for failure. And the 1% that are actually on to something will quickly move off the platform onto their own, or will end up losing whatever they make when their strategy loses whatever alpha it has and they can't admit it (I've seen this happen, but never the former, actually). Trading is hard. I run a proprietary trading firm with modern technology infrastructure and we have a lot of trading experience. You really have very little chance of success unless you're doing this full time, and even then it will take years before you have enough experience to build a sustainable income.

yarou 13y ago
In other words, there's no easy way to get rich. There is always pain involved, and people looking to get rich quick in financial markets are probably better off learning how to play poker.
- breischl 13y ago
  Because playing poker is a much easier way to make a sustainable income! Hm... actually, it might be. At the very least you certainly don't have to shell out as much for software.
  - gizmo686 13y ago
    Also, in zero sum games like poker and investing, the real question is how much better then the competition you are. In investing, you are up against some really good competition. In poker, you can play against a lot of recreational players, who are could be far less skilled then you. With online poker, you can play many low value hands in parallel to get even easier competition.
    - gnaritas 13y ago

pontifier 13y ago

This is quite interesting. I had just built a predictive rebalancing bot to trade on MtGox a few hours before it collapsed. I was rebalancing every 60 seconds and making lots of trades. I only got a couple of hours of run time before it stopped working :( Here's the bot I built: https://github.com/pontifier/rebalancer https://github.com/pontifier/rebalancer Quantopian looks interesting, and hopefully the exchanges it trades on won't disappear.

gedrap 13y ago
Doubt that. NYSE is definitely a scam. I have heard they pivoted from creating a new social network, like Facebook just better.

jgh 13y ago

I've really enjoyed playing with Quantopian, and I think that I will continue to play with it as an educational tool. However my algorithms so far have been very good at losing an awful lot of money, so I think I will be sticking with simulations for now :)

lucisferre 13y ago
> my algorithms so far have been very good at losing an awful lot of money But... the solution is just so obvious, just make the algorithm trade the opposite of what it would have done. Pure profit!
- xerophtye 13y ago
  haha! So... if the algorithm thinks a stock will rise, go short instead and vice versa?
- nick_dm 13y ago
  A few years ago I heard a story from an acquaintance working at an online spread betting company. One senior figure suggested that they should actively bet against their worst performing customers rather than hedging, they discovered pretty quickly that this wasn't a good idea!
  - seunosewa 13y ago
    What happened when they tried it?

EGreg 13y ago

For the next week my comments on Hacker News -- except this one -- will attempt to garner as many points as possible by exploiting various HN tendencies. Feel free to upvote this comment if you think this is cool btw :)

watermarkcamera 13y ago

can I add comment ?

vijucat 13y ago

I've always found https://www.quantconnect.com/ https://www.quantconnect.com/ more interesting. They're just not as good as Quantopian at generating some buzz.

monksy 13y ago

The only issue that I have with that is that they require an IB account. That has a min of $10k. Thats not exactly easy to come by.

cpwright 13y ago
If you don't have $10,000 to risk, you probably shouldn't attempt to trade in an automated fashion. You need enough capital, because any one trade is likely to have a small percentage upside and you need to turn it over frequently.

Ecio78 13y ago

For those interested in doing some algo testing I found this site quite interesting: http://systematicinvestor.wordpress.com/ http://systematicinvestor.wordpress.com/

agilebyte 13y ago

Can anyone in the know tell me why traders are not interested more in sports betting? Seems like you have a lot more people betting with heart then brain which should result in a profit if you employ all your fancy algorithms no?