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AlgoLab by theAlgoLab.com is trade execution assistance software. theAlgoLab.com company, software, or it's principals do not provide trading advice or recommendations. If you require personalized professional trading / investing advice, please consult with a licensed broker/CTM. Actual past performance, or simulated past performance does not guarantee future results. Trading futures assumes a high level of risk. theALgoLab.com and it's principals are not registered as investment advisors. Consult with a CPA or financial advisor, or broker to ensure that your strategy utilized is suitable for your investment profile before trading in an actual funded live brokerage account.

 

Some trading performance results posted at this web site are from back-testing systems during the dates indicated, using specific settings, from a basket of different futures contracts. Some performance results shown here benefit from hind-sight. Some results shown result not from actual funded trading accounts, but from simulated accounts which have certain limitations. Actual results will differ given that simulated results could under, or over compensate the impact of certain market conditions. Actual draw downs could exceed back-testing draw downs when traded on actual trading accounts.  While back-tested results might show profitable returns, once commission, slippage, and fees are considered, actual returns will vary. 


Futures trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website or on any reports. The past performance of any trading system or methodology is not necessarily indicative of future results. 

WHAT COULD POSSIBLY GO WRONG?

IMPORTANT INFORMATION​ ABOUT USING ALGOLAB Please read and understand all of the following warnings and risks regrading using AlgoLab automated trading software, and trading in general. If you require additional explanation or clarification, please no not hesitate to contact us and ask.

YOUR ALGOLAB DASHBOARD

 

  1. STATUS LIGHTS If you ever notice the "Connection" alert indicators at the top of your dashboard page turn RED, then your AlgoLab has become disconnected. Each day at some point around 10:00 pm, your connection light will turn red for a short period of time - this is normal. Each weekend, your connection light will also turn red for a few hours - this is also normal. If your connection light turns red outside of these normal maintenance periods, then please notify us.
     

  2. 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 notify us.
     

  3. 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.
     

  4. CUSTOMIZING ALGOLAB SETTINGS Your AlgoLab trading system is intended to run continuously, unattended using your capital and leverage setting (use the Performance Viewer to estimate profit and drawdown risk using various capital and leverage settings), as it does with the AlgoLab House account. However, some AlgoLab customers have attempted to improve upon the default performance of SuperSystem by "timing" their trading system by "pausing" and "unpausing" the system using your dashboard page in order to possibly avoid drawdown periods, or by changing risk values to capitalize on profitable periods.

    The AlgoLab Automated Trading System is optimized for automatic operation without changing any of the default system settings.  Circumventing AlgoLab default system settings may result in performance metrics significantly different or worse than those estimated by the Performance Viewer historical backtest. Most accounts who have used custom settings have not outperformed the default AlgoLab system settings. 
     

  5. MARGIN Be careful ramping up your leverage value too high and not having enough capital in your Interactive Brokers account to cover minimum margin requirements. Periodically, AlgoLab will go through periods where you have one or two positions to suddenly 9 or 10 in a few hours. This is usually due to markets consolidating after a run-up, then breaking out of consolidation to start a new up-leg. If you are trading at a higher leverage level, then you could be at risk of a margin violation due to an excessive number of open position. You can monitor your current position margin on your dashboard page called "Margin Used". If this value starts to approach your "account value", then you may be close to a margin violation at Interactive Brokers. Reducing your risk value will result in fewer contracts traded, and a resulting lower "Margin Used" value.

 

INTERACTIVE BROKERS

 

  • NEW ACCOUNT SETUP. To make certain that your new IB funded account is compatible with AlgoLab, please follow the instructions posted here when opening a new, funded Interactive Brokers account.
     

  • DO NOT PLACE TRADES. Do not place trades In your IB funded account using Interactive Brokers trading software TWS or any other platform. When you log into these trading platforms, you will force AlgoLab to disconnect from your IB account.

  • LOGGIN INTO YOUR IB ACCOUNT You can log into your "account management" at the IB we site without risking disconnecting AlgoLab, BUT DO NOT ATTEMPT TO LOG INTO YOUR IB ACCOUNT USING THE NEW "CLIENT PORTAL LOGIN" !! This is an API connection and will force your AlgoLab to disconnect. 

 

 

RISKS

 

Most of these risks are very unlikely to happen, and some of them are possibly even less risky than a stock market investment, but we feel it is our responsibility to point these out and make sure each client understands them before starting to trade a funded account with AlgoLab.

 

  1. DRAWDOWN
     

    • When you preview your profit and loss using the Performance Viewer with your capital and leverage setting, you will note two metrics: average annual drawdown (Ave an DD), and maximum drawdown (max dd). Average annual drawdown is the average maximum drawdown as a percentage of your STARTING CAPITAL that should expect to happen every year, at some point during the year. Here is an example of a 20% annual maximum drawdown:
       

    • Jan 1 account value = $100,000 (starting capital)

    • May 1 account value = $150,000 (50% return)

    • July 1 account value = $130,000 (drawdown)
       

    • The drawdown is $20,000, or 13% drawdown from PEAK equity of $150,000, or 20% drawdown from starting capital of $100,000. Again me always measure drawdown as a percentage of your starting capital, not from the peak equity prior to the drawdown.
       

    • This does not mean that each year will have a drawdown at some point as large as this value, nor does it mean that your actual maximum drawdown wont be larger than this value. It simply means that this was the average maximum measured during the historical backtest which is hypothetical.
       

    • The Maximum drawdown is the highest drawdown amount in dollars that occurred over the entire historical backtest. If the historical backtest spans 10 years, then you might expect this magnitude of drawdown to occur at a frequency of at least once every 10 years - but it could be more often, or less often. If, for example, after 3 years of trading your $100,000 AlgoLab account, you earned 100% return and your account was valued at $200,000, then on the 4th year your account suffered a maximum drawdown of $30,000, this would represent only a 15% drawdown of your entire account value. However, we never know when this drawdown period will begin, and it is theoretically possibly for this $30,000 drawdown to start the very second day after you open your account with $100,000 of starting capital. In this case, your drawdown as a percentage of your account might be worth 30%.
       

    • Also keep in mind that the S&P 500 stock index lost 50% of it's value in 2008. 
       

  2. LOW CAPITAL / HIGH RISK INSUFFICIENT FUNDS
     

    • ​​If you are using one of our 'full' systems that trade all 19 symbols  (DifferenceEngine, SuperSystem, etc), and have the minimum recommended amount of capital in your Interactive Brokers account ($50,000 USD), then there is a possibility that a drawdown (losing period) may start soon after you have started trading. A typical drawdown might be 25% to 30% (low capital accounts) which could reduce the capital in your account to $35,000 or less. At this point, it is possible that Interactive Brokers will periodically reject new trades submitted by your AlgoLab due to insufficient margin available in your account. If the total number of new trades for your account decreases, then this can effect your ability to recover from the drawdown - ie: recovery could be much slower than a fully capitalized account. At this point, there is also the possibility of an extended drawdown which may result in further reduced performance and losses.
       

    • Low capital accounts going through a drawdown which has reduced the amount of available capital to less than $30,000 to $35,000 should either switch to trading only 2 symbols (GC and RB), or should add more capital to their accounts to prevent IB from rejecting new trade submissions.
       

    • The chance of a severe drawdown starting immediately after the start of trading a new account is low, but this is a possibility and it has happened in the past. AlgoLab users who start with more than $50 K and use low leverage settings like "1" contract have successfully recovered from these immediate drawdowns. The best defense is sufficient capital with a lower leverage setting.

       

  3. OPENING PRICE GAPS
     

    • A price gap is a break between prices on a chart that occurs when the price of a symbol makes a sharp move up or down with no trading occurring between. It is possible that GAP can occur over a position exit stop which would mean that the exit price of a position could be much less favorable than the stop value resulting in additional "slippage" costs.
       

    • Typically these gaps occur on the open after markets close for the hour break each day or when markets open at 4:00 pm MST on Sunday after closing on Friday afternoon for the weekend. If some material news event were to happen while the market was closed, it could cause a spike in price when the market re-opens.
       

    • Performance Viewer historical backtests account for these open price gaps, and they are considered a normal risk when trading anything from stocks and bonds to ETF's or futures. Gaps are usually minimal, but they are a risk, so I felt obliged to mention them here.
       

  4. LOCK LIMITS
     

    • A lock limit occurs when the trading price of a futures contract arrives at the exchanges predetermined limit price. At the lock limit, trades above or below the lock price are not executed. These days, only agricultural commodities (wheat, soy, soy meal, and corn) observe lock limit rules. Lock limits can occur for multiple successive days, and could result in losses beyond the position exit stop price.
       

    • An example of lock limit would be as follows:
       

    • Imagine that corn settled at $4.50 the day before a major USDA report. The report was very bullish and Corn immediately moves to the limit up value. Corn would stop trading at $4.90. The exchange will not allow any new orders to buy corn over $4.90. Chances are that corn will not trade for the remainder of the session. After the market closes, if corn settles at limit up prices, the new settlement price will be $4.90. When the next trading session opens, corn will be able to trade between $5.30 ($4.90 + $0.40) and $4.50 ($4.90 -$0.40). If the market still prices corn at $5.00 at the open, it will open up at $5.00 and traders will be able to buy and sell again. 
       

    • Lock limits are very rare - I in fact, don't recall ever going through a lock limit in all the years I have been trading.
       

  5. BANKRUPTCY
     

    • If you are Canadian, your Interactive Brokers account is CIPF insured for up to $1,000,000. This government insurance is not available for American customers.
       

    • MF Global futurage brokerage firm declared bankruptcy on October 31, 2011, and the company was liquidated. Losses incurred by customers of MF Global stood at $1.6 billion. In January 2013, a judge approved a settlement that would return 93 percent of customers' investments, with the prospect of additional payouts from the company's general estate. In December 2014, MF Global Holdings settled a U.S. government lawsuit, agreeing to pay $1.2 billion in restitution and a $100 million fine for customer losses tied to the company’s 2011 collapse.
       

  6. MALICIOUS LOG IN
     

    • If someone were to obtain your Interactive Brokers account name and password, they would not be able to log into your account via the Interactive brokers web site because access requires the IB Mobile security device approval. However, if someone were to obtain your AlgoLab account port number, and password, they could use the AgoLab dashboard to change your trading settings - the most malicious activity might be increasing your capital or risk so that when orders are placed, AlgoLab would be placing orders for far more contracts that normal. Your Interactive Brokers account will automatically disallow orders over a certain limit, as will your AlgoLab software. Also, you will get a confirmation email that someone has used your port # and password along with details of the dashboard change. If you didn't make the change, then you can notify us, and we can reverse any orders that may have gone through, then change your credentials.
       

    • If someone were to obtain your Interactive Brokers account name and password, and attempt to log into a trading platform, theoretically they would be able to place trades in your account. However, realistically each time they made a malicious attempt to log in, AlgoLab would prevent the log in because it has already established a connection to your IB account.