I started experimenting with automated trading algorithms back in 2010. To do so, I wrote my own simulation engine in Perl, hence the name PerlStock. This engine had the following features:
- download end-of-day data from the internet
- simulate trades based on daily data
- analyze past trades and predict future performance and risk
- select stocks for a portfolio
- analyze portfolio performance
- export data to Excel
The original code from PerlStock has long been replaced by a more appropriate development environment. However, the original concepts and ideas are still valid, which is why I kept the name.
I continue to research trading algorithms on a daily basis. In this blog I am sharing some of my findings.
I’ve been a loyal MultiChart’s customer for the last 2 years. The tool has served me very well and has forever shaped the way how I look at the development of trading strategies. But the last few months I have struggled a lot with finding creative ways to work around some shortcomings of the platform. …
When trading about the stock market, most people don’t think about the liquidity. Trading is performed as if liquidity is infinite and our own trading won’t influence the overall market. Unfortunately, this is not a true assumption. The following table shows the average dollar-amount of shares exchanged in a single trading session:…
Developing trading strategies, especially when developing strategies for portfolios, is a constant battle: you will quickly reach a point where your productivity and your imagination is limited by the processing power you have at hand.
Here are some parameters of a strategy for reference:
In many cases past trading performance is an important indicator. If we are constantly trading a single instrument, this is easily derived by looking at the equity curve. However, this is no longer true, if we either
- start and stop trading, e.g. after losing/ winning a number of trades in a row, or
Here, I’d like to give you an overview of the things you will need in order to get started with developing a trading strategy.
The first thing you will want is a software package to develop your trading strategy with. There are a ton of packages out there, but IMHO only a few are worth looking at. …
Before starting to trade, we need to have clear goals. The naive answer is “to make as much money as possible”, but this doesn’t help us answer the most important questions:
- how much money will we make?
- how much money do we need?
- how much money are we willing to lose?