October 10, 2019

We at AlgoLab continually monitor the performance of our software, taking note of results as compared to a number of metrics including order execution (entry and exits), run-ups and drawdowns, etc. At this moment, AlgoLab House (SuperSystem) is currently going through a significant drawdown. The potential for a drawdown was first reported in a blog post (and email) on August 22. This post was even placed on your AlgoLab dashboard as a link at the top as it seemed like an important warning to all users that we may see a drawdown soon. I do hope that communications like these blog posts, and making the real-time performance of both house accounts available to you (AlgoLabHouse (SS) and AlgolabHouse2 (Difference Engine - DE), does provide valuable infor...

August 22, 2019

The above chart is House Account 2 trading DifferenceEngine. One big advantage of my golden rule about never pausing or changing the house accounts in any way, is that it provides a consistent track record that allows for the observation of trends or patterns that would be difficult to see if not for that consistency.

A trend that I am seeing right now, are these 2 channel lines consisting of a lower trend line and an upper channel line. The lower and upper lines seemed to accurately predict both our recent equity top and the bottom of the drawdown that started Jan 2019. Another pattern is the average time duration of drawdowns which seems to be around 3 months or so.

Using both the trend line, and the average drawdown duration seems to predict that th...

January 14, 2019


We have been researching the performance variation between those accounts with <$80k capital at any point and those with >$80k and have discovered that the larger capital accounts can average about 25% greater profit per trade than the lower capital accounts. The reason for this is that at times of high trading activity, the smaller accounts miss a significant number of trades due to insufficient margin.  Margin is consumed BOTH by Open Positions (you can see this on the dashboard) AND by Open Orders (orders that are not yet filled, not visible on the dashboard). In addition, there is an order priority constraint used by CME and/or IB when accounts have low capital thereby reducing the number of orders that actually get placed. Following is the anal...

January 2, 2019

Most AlgoLab users are trading with the DifferenceEngine (DE) system or subscribed to AutoSystemSwitcher, which has been set to trade the DE system for over 6 months so AlgoLabHouse2 is the reference house system for this analysis.

If you've ever noticed that the AlgoLabHouse2 account seems to outperform your own AlgoLab account, there are a few reasons why this might happen, and none of them are due to an unfair advantage that the house accounts may have over other AlgoLab accounts. The possible causes for this discrepancy could be any or all of the following 3 reasons:

  1. You are circumventing AlgoLab's built in automation by pausing your account, changing your leverage (risk value, or # of contracts traded), or manually exiting your trades (Al...

November 29, 2018

AlgoLab automated trading software is now connected to and live-trading for just under 100 clients. Over 132,000 futures trades have been executed, algorithmically and automatically. The longest-running account, AlgoLabHouse as been live for almost 28 months.  Most importantly, live trading data has been consistent with the Performance Viewer modeling estimates thereby reaffirming that AlgoLab software has and will continue to perform as designed.

Based on the results to date, it becomes increasingly apparent that AlgoLab has the potential to play a bigger role for those with larger investment capital. AlgoLab, combined with the new “fixed number of contracts risk setting” allows a client to easily select a risk profile that matches or exceeds the per...

August 14, 2018

As I prepare for my 3rd ultra marathon this year; a 100 km race in Kananaskis this Saturday, I'm getting into my "ultra" mind set required to complete these 20 to 35 hour endurance efforts.

  1. Slow, but steady pace will get me to the finish line. 

  2. I don't get too upset about the small set-backs along the way because it's a long day, and full of ups and downs.

  3. I don't get too excited about the small gains along the way because, again, it's a long day and I know there will be plenty of ups and downs along the way.

  4. I will have confidence in my plan, and I will stick to it with discipline. My slow but steady pace will get me to the finish line.

Successful trading is like running an ultramarathon. I do realize some accounts are in a bit o...

April 8, 2018

DOUBLE TRIPLE IMPORTANT CHANGE. AGAIN. yes again. As of June 26, 2018 I am REMOVING BOTH THE 1000 PERIOD LOOKBACK TREND FILTER AND THE STDEV 1.1 FILTER. After careful consideration, I feel that stdev was being calculated in real time on the actual entry bar, and may be the reason why so many backtest trades were not duplicated in the real world. After I removed lookahead bias (including the current entry bar in lookback trend calculation), the advantage of the 1000 bar lookback was gone - however... the max drawdown is still lower, so it may be worth offering this as an option.

IMPORTANT CHANGE: As of June 25, 2018, I ADDED TRIANGLESMA back into DifferenceEngine. As well, I changed the symbol set to:

TrianglesMA: ZS,ZM,YM,NQ,GC,PL,EUR,GBP,JPY,CL,RB,HO,...

April 3, 2018

I wanted to compare our current drawdown to the worst drawdown in the backtesting data, just to get an idea of what could happen... not to say that this WILL happen, but it's prudent to be aware and prepared.

  1. This drawdown so far, as of April 3, 2018, according the the AlgoLabHouse account:
    .05 risk, $100,000 of capital, SuperSystem
    -17%
    So far has lasted 1 month
     

  2. 2009 drawdown according to Performance Viewer backtesting app
    .05 risk, $100,000 of capital, DifferenceEngine
    -29%
    Lasted approximately 2 months

The current drawdown of $-16,907 equity reduction based on the original investment capital of $100,000 (The original capital was $55,700, but we are using $100,000 as the current capital setting) is -17%

The historical maximum draw...

March 25, 2018

STUDY 1: Percent winning trades triggering INCREASE / DECREASE IN LEVERAGE (RISK)

A week ago, I published a study that found a weak link between increased AlgoLab performance (decrease in risk/reward ratio (G/P)) and a recent string of both winning trades, and losing trades. if there is a good % of winning trades recently, then GP improves if risk is increased. If there is a large % of losing trades over a much longer period of time, then GP also improves if risk is ALSO increased. This is logical, and basically says that when the % of profitable trades starts to increase, that it will continue. This also says that if we have been going through a long drawdown period, it can make some sense to increase risk to catch the equity "bounce back" when marke...

March 18, 2018

Is is possible to reduce drawdowns in your account by manually adjusting your AlgoLab settings?

AlgoLab was designed to be fully automatic, but it does offer the some manual controls like using the pause button, adjusting the risk value (leverage), and customizing the symbol portfolio.

Can we improve the results of your AlgoLab by overriding the automatic operation, by using your discretion to apply some of these custom settings? In this blog post I'll attempt to test a theory that I have about using a recent string of winning closed trades as an indicator to improve the risk/reward ratio.

RISK REWARD RATIO (GAIN/PAIN RATIO)

When I measure trading results, I do not like to use profits as the only measure of how well a system performs. What is m...

November 22, 2017

FUTURES BASICS

Futures are not like stocks in that you don't actually "buy" or "sell" any number of shares of a futures contract. Futures are CONTRACTS. When you "BUY" a single futures contract for, say, the S&P 500 emini contract (symbol "ES"), you are entering into a contract with a counter party who agrees to take the opposite side of your trade. When you "BUY" a futures contract, you are NOT SPENDING any of your capital. Yes, it is absolutely FREE! When your trade is CLOSED (ie: when you sell your ES futures contract), then if you made a profit, the counter party to your contract must transfer funds to your account equal to the contract specified amount called the "Big Point Value" times the number of points that you made on the trade times the nu...

November 7, 2017

Here is a scenario that I ran into the other day. AlgoLab customer A was happy with his 100% return on a $50,000 investment after year 1, and was considering adding an additional $50,000 to his account to increase the total investment to $100,000. He wanted to achieve the same percentage return and average percentage drawdown as as he did with the original $50,000.

From a couple of tests using the Performance Viewer, here is how we calculated the new risk value for the new $100,000 amount that would generate similar percentage returns as previously:

Date range = 2009 to 2017 (The big spike in 2008 was removed)

Multisystem = DifferenceEngine

1. Here are the settings and results from the original $50,000 of capital (note that these results are 'raw' hypoth...

August 10, 2017

Stock indexes have been in a BFTR since July 17th and our energy sector symbols have been sideways range-bound since July 28th. AlgoLab earns profits when markets are moving up or down, not when they are moving sideways.

The chart attached shows the ES (S&P 500) 60 minute continuous contract since July 17th. Today the ES contract is down over 21 points and if it breaks down further, we could start earning profits on the short side. AlgoLab SuperSystem uses a trend filter to switch between long and short bias trades. The blue line in the plot is a 1500 period moving average. AlgoLab SuperSystem restricts all new trade entries to long-only if current price is above the 1500 hour moving average. If below, AlgoLab will start to submit short-only...

August 10, 2017

I hate drawdowns as much as you do, and after touching a 70 something percentage return since the house account started trading in August of 2016, we are going through a bit of a drawdown at the moment.

Can drawdowns be avoided?

If I knew of a rule that would reduce loses, then I would incorporate that rule into AlgoLab's SuperSystem trading system, but unfortunately, I have not found any rule that is beneficial and that passes my statistical tests which is why the AlgoLab house account is never paused or changed. Examples of some of those rules that I have tested include tracking the equity curve itself, and pausing trading when the equity value drops below a moving average of that equity value (ie: when your equity starts to drop below a certain leve...

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