Tips on developing automated trading strategies

Sharing some insights from a 3-day working session with a Belgian systematic trader. Also an update of what else has happened in recent weeks on my trading front.

It’s been a nearly a month since my last blog post!

A few things have happened since my discussion of Bergstrom’s e-ratio:

  • Have moved out of the trading office in central London (I was there since the start of October) – and am currently working from home – for the first time in a long time – that said it’s actually rather nice to work from home for a change and thus far am not regretting it one bit.
  • Early in January, spent 3 days in Belgium (near Ghent, see photo below) meeting with an independent trader who specializes in running close to 20 strategies on the US indices and US fixed income products.  This  was a great time for both him and I.  We discussed many different areas of trading such as the strategy development process, looked at several strategies shared by Jeff Swanson on the systemtradersuccess site, did some coding and also reflected on other aspects of life, and of coursed tried some tasty 9.5% Belgian beer.  Mr Belgium and I first met at a traders Ghentnetwork meetup in central London some years ago -[ there’s another meet-up just like that this coming Wednesday]!  He tries to make the journey from Brussels several times a year just to be able to meet with some other traders.
    • Thankfully I was able to help him a bit with analyzing various bits of raw data and explain some trading software things to him.  He also said it was very motivating for him to be able to work together and discuss ideas with another trader in the way that we did.
  • Have progressed a bit further with coding the two trading strategies that I have principally worked on for the past four months.
  • All that said, the time allocated to trading in the past month has reduced substantially as I have had the opportunity to pursue some other paid work.  Back in September, I shared some thoughts saying that I would try and create some other income streams alongside trading (not that trading is actually an income stream at this point in time!).  The idea was to split my 60-hour working weeks into 2/3rds trading and 1/3rd other work.  It hasn’t exactly panned out like that – but in December and January thus far, there was a good chance to have some money coming in, so I went for it.

Development steps for automated trading strategies

Mr Belgium had some pointers, for which I am incredibly thankful:

  • Don’t spend too much time working on any one strategy – if you don’t make headway quickly with it – then move onto the next one.  Give new ideas a short leash!
    • Interestingly, I have done the exact opposite in this regard.
    • The logical counter-argument here would be to avoid “strategy-hopping” and to become really good at one strategy.
    • Finally, the systematic trader working at the hedge fund at which I based in 2017, also liked the approach of having lots of ideas and building a structure through which to process ideas.
  • Don’t be afraid to start with strategies freely shared online – he says some of his current strategies are very much based on some of the code he obtained online.
  • Spend less time coding and more time thinking and reflecting on trading concepts – concepts on which strategies could be built – he says he is “working very hard” whilst he is out gardening, relaxing on his boat or going for a walk.  (Alas, he said that my coding already seems to be a reasonable level – so was glad to hear that!)
  • Hunt for ideas – books, forums, websites, Twitter!  To a large degree, it is much more efficient from a timing perspective to go with concepts that others have already shared rather than building everything from scratch on your own – this is what he found when he reflects on how much time he invested in creating his own ideas over 10-15 years of coding.  Don’t reinvent the wheel.
  • He didn’t directly comment on whether I am targeting the right markets – but he commented that he had never managed to develop profitable strategies for the currency markets – regardless of timeframe – his guess was that it was simply too spiky and volatile.

Lance Beggs on “Is it time to quit trading?”

Lance Beggs from YourTradingCoach shared a great article some weeks ago in which he addressed the question of knowing when it is time to quit on trading.  He suggested that it would be best to totally close it for a period of 3 months (or something like that) and at the end of the period, simply assess whether you miss it badly and can’t wait to start again, or whether you realize that your life is actually more fulfilling without trading in it, and you would actually prefer to say good-bye to trading on a more definite basis.  Here’s a link to the article.  I thought this is a great piece of advice, applicable not just to trading, but also to other areas in one’s life whose existence is questioned.

At this point in time, I am not considering putting trading on a 3-month halt, but I thought it was an excellent perspective – and it is backed by Lance’s own experience of working with many aspiring traders who have found themselves in that difficult position.

That’s all for today.  Happy trading all!



This entry was posted in Financial Markets 101, Futures Trading, Testing. Bookmark the permalink.

3 Responses to Tips on developing automated trading strategies

  1. Qoyyuum says:

    Hi George, thanks for the tips. Was wondering if you can share how do you go about backtesting with quality data? I currently use a VPS and let it download the tick data for better backtesting. History Center sucks.

    Liked by 1 person

    • I have been using TradeStation as a backtesting engine. TradeStation also supplies the data. If you search on the “Testing Category” on the blog here, you’ll find a lot of posts in which I share my testing work in greater detail. Does that help?

      Liked by 1 person

  2. Pingback: Feb’18 Trading Banter | Trick or Trade

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