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...

October 28, 2017

One of the risks involved in deploying an algorithmic trading system on the real world, is the chance that the system rules don't accurately reflect reality. For example, a common mistake that trading systems designers make is to include the close of the very last price bar in the calculation of an indicator - say a moving average. This is called "look ahead bias", and for obvious reasons, it would be impossible to do in real time, because the close of this time period's price bar is in the future. Look ahead biases give the historical back test a distinct advantage and falsely inflate the trading system's performance.

Another cause of inaccuracy in real-time is trades missed due to fast moving markets, that would have been recorded as trades in the h...

October 16, 2017

***Funded Accounts Gain Another 5%***

In the last update we looked at the performance of the funded accounts to Sept. 22nd. Of the 10 funded accounts,  9 posted gains (avg. 13% over avg. period of 4 months!!). Remarkable!

As of today the 10 funded accounts totalling over US $900,500 collectively are up 18% or nearly $160,000. This is a gain of $40,000 or 5% in 3 weeks since the last update!

The only account in the red previously at -11% is now at -6% having popped it’s head into positive territory then retreated back. This account is trading at higher risk and therefore subject to bigger swings.

Summary: Funded account owners have been nicely rewarded to date.

Q: What was behind this recent run-up?

A: AlgoLab performs very well in volatile markets!

Signific...

September 24, 2017

To the AlgoLab Community

AlgoLab invites like-minded investment enthusiasts to become part of the AlgoLab community, sharing strategies and techniques, working collectively toward the improvement of the results of all account holders.

One of the unique-in-the-industry features of AlgoLab besides its capacity to generate outsized returns is the user ability to view the progress of other anonymized accounts both out of curiosity and more importantly, to view their account settings. This allows any user to access the settings of top performers so that they may optimize their own returns. Even though AlgoLab has the capability to perform very well in hands-off mode there are some users who have outperformed the AlgoLabHouse account (standard settings) usin...

September 10, 2017

From the September 1, 2017 AlgoLab Update

This past week (ending Sept. 1) has been tremendous for AlgoLab subscribers and once again, confirmation that the AlgoLab trading system really does generate outsized returns during periods of widespread market volatility.”

Some like sammy may remark “OK, that was great but what happened the rest of July and August !#$%@?”

                             sammy

Many new subscribers (real $$$ or trial accounts) who signed up in late June or July will be confused or at least disappointed at the unpredictability of their AlgoLab trading results. A supplemental question might then be “Are the stock markets, Fx or commodity prices predictable?” You kno...

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...

July 28, 2017

1. ALGOLAB DASHBOARD

a. STATUS LIGHTS If you ever notice the "Connection", or "SYNC" alert indicators at the top of your dashboard page turn RED, then please contact AlgoLab so we can look into the problem.

b. TIME. If you ever notice that the time field on your dashboard page is offset from the current MST time by more than 45 minutes, please contact AlgoLab so we can look into the problem.

c. CLOSED TRADES the "Closed Trades" table as shown on your dashboard page can be inaccurate. For accurate activity statements, please generate an account statement after logging into your account at the Interactive Brokers web site.

d. ALGOLAB TIMING Your AlgoLab trading system is intended to run continuously, unattended using your capital and risk setting (use the...

March 8, 2017

I've been wondering what kind of impact a large number of AlgoLab clients all placing orders for the same futures contract at the same price would have on their respective fills. I have not yet observed any clients missing trades due to other "competing" AlgoLab orders, for either the simulated accounts, or funded accounts, but I suppose the possibility is there. And if that were to happen, who would get filled first? And who would not get filled at all? If all of the virtual machine containers are firing orders out at exactly the same time, from the exact same physical location, at exactly the same price then I imagine who got filled and who didn't would be up to chance.

The futures markets that AlgoLab trades are typically "high volume" markets. For...

March 8, 2017

All AlgoLab client's Interactive Brokers account passwords are private, although they may be occasionally known to us to enable the ongoing smooth operation of their AlgoLab instance, and Docker Container maintenance. I was wondering what kind of problems someone could cause if they were to obtain a customers IB password and account name - either through us, or through one of our contract employees, or through a slip of our client's security protocol.

As for trading, a thief could log into the stolen account name through Trader Work Station (TWS) or Interactive Brokers web trading interface. And from there, it is possible they could place a bunch of random trades. But the outcome of the trades would be random also - probably 50% of the random trades w...

February 16, 2017

Use AlgoLab to hedge against stock loses in the case of a stock market down turn

Let say the value of my current stock portfolio is $100,000, and I'm worried about the next bear market. An average bear market loss is 27% and lasts for about 1 year (14 months to be exact, but lets just estimate 1 year for simplicity). In my case, I would want to protect against a $27,000 stock portfolio loss.

So how can I use AlgoLab to hedge, or to possibly offset some of those potential losses, and how much would that "insurance" cost?

1. Open the Performance Viewer and open the "SuperSystem" multisystem, and specify only the three stock index symbols "Sp500 E mini", "NASDAQ index", and "DOW index". Also, since Gold is sometimes correlated with stocks, and sometimes ne...

February 12, 2017

AlgoLab stock index can be more profitable on a risk adjusted basis than buying stocks

Trading Systems Performance Expectations

Algorithmic trading systems have been developed by optimizing system rules, and parameters on historical data. This does not guarantee that past performance will be as profitable, or will exhibit similar characteristics to real-time trading results. Given enough variables, it is possible to curve fit a system to historical data, and any relationship between those rules and future, unseen data may be random. AlgoLab has taken steps to reduce the number of variables and system rules to reduce the degrees of freedom which will reduce the chance of curve fitting. Current market regimes can and do change, and rules that previously...

February 12, 2017

HOW TO USE ALGOLAB WITH A SMALL ACCOUNT (<$20,000)

Trading Systems Performance Expectations

Algorithmic trading systems have been developed by optimizing system rules, and parameters on historical data. This does not guarantee that past performance will be as profitable, or will exhibit similar characteristics to real-time trading results. Given enough variables, it is possible to curve fit a system to historical data, and any relationship between those rules and future, unseen data may be random. AlgoLab has taken steps to reduce the number of variables and system rules to reduce the degrees of freedom which will reduce the chance of curve fitting. Current market regimes can and do change, and rules that previously predicted future prices may no longe...

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