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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Doug F who wrote (1371)	6/24/1999 11:07:00 PM
From: Tai Jin	Read Replies (1) \| Respond to of 18137

Is there any way I can set upside and downside limit sell orders simultaneously, and then if one is hit, have the other cancelled? This would allow me to EITHER take profits or stop a bleeder, and protect me from going short after making the first sale. Yeah, dream on... :-) That's what I'd like too, it's basically programmed trading. I don't think that any broker offers that capability. ...tai

To: Doug F who wrote (1371)	6/24/1999 11:36:00 PM
From: -	Read Replies (1) \| Respond to of 18137

Just talk to Eric P. He already has all this stuff running on his bank of machines - he writes new systems while the machines trade away profitably. Not sure about the neural net system though. Doing it with MBT, now that is another question. I suggest you (also) re-post this over on the "MB Trading" thread. Good questions, I would like to know the answers myself (if they're not available here, they would be on the MBT thread...) Regarding your P.S. If you came home from work and the neural net system had lost a fortune trading that day, now that would be a real frustration - after all, it's only mocking you. I guess you could always give it a dunk in the swimming pool ;)... -Steve

To: Doug F who wrote (1371)	6/25/1999 8:14:00 AM
From: Eric P	Respond to of 18137

Re: Automated Trading I want the power to program in scenarios and have my trading software do the actual trades for me. This will give me a heck of alot more freetime, and it will mean that the trade gets done - sometimes I get emotional and don't stick to my gameplan. I know what I want to do - I get so frustrated having to sit in front of the screen, drone-like, actually carrying it all out. Am I dreaming? Or is there something like this out there? As Steve mentioned, this is exactly the kind of trading I do. It offers many advantages, in that it is much quicker (instantaneous) than I could ever be, it always follows the 'game plan' without fail, and it has the ability to microscopically monitor thousands of stocks, versus the one or two than I can watch. I don't know of any such systems that are commercially available. When my partner and I were initially developing our trading platform, we intended to eventually market the system, but decided against it because of the inevitable headaches that would result. We have been successfully trading with it the past 9 months (with only two losing weeks). If there are any experienced, consistently successful traders out there that would be interested in exploring options for using this system, please send me a PM or e-mail and we can discuss it. -Eric ericpatterson@home.com P.S. The following post is a description of our automated platform that I wrote this past fall, when we were considering marketing the platform.

To: Doug F who wrote (1371)	6/25/1999 8:22:00 AM
From: Eric P	Respond to of 18137

Automated Trading Platform Background Not long ago, it was relatively easy to be a successful daytrader. All that was needed was access to the SOES system and to watch for strong momentum in a particular stock and jump in for a short ride. Now, the marketmakers are implementing more advanced computerized systems which is making it much more difficult for the daytrader to be profitable. From my own daytrading experience, I found that I could often identify good trading entry/exit points. However, the market moved so fast that the stock would get away from me while I was still verifying that this trade met my conditions, or while I was entering my order. I simply was too slow to get filled on the most promising trades. Another trap I fell into was the temptation to over trade due to boredom. If the purpose for daytrading was to make money, then you certainly couldn't make money without holding a position, right? Unfortunately, I was only able to monitor a few stocks at a time, and my ‘perfect' entry points didn't occur very frequently in the limited number of stocks I monitored. Therefore, I would make the mistake of taking low probability trades simply to get back into the ‘action'. It was also frustrating to miss the largest intraday moves because it occurred in a stock that I was not monitoring. This tended to happen frequently, since I was only watching three or four stocks. Finally, I found that although daytrading could at times be exhilarating, it was more likely to be very stressful. This can be true for even the most successful daytraders, since they know that the accuracy of their split second judgements will determine whether they are able to earn a living. After a few months, it can be very easy to get ‘burned out', begin second guessing yourself and quit trading. The ‘perfect' trading tools would have to find a way to alleviate some of these problems. Automated Daytrading Platform - Description For me, the ideal solution would be a trading platform incorporating the following: => Breadth: Ability to simultaneously monitor thousands of stocks and trade them based on precise entry/exit requirements. => Diversity: Ability to simultaneously monitor and trade dozens of trading systems. => Power: Utilizing an expert system capable of instantaneous trade identification based on the criteria established by the trader. => Speed: Satellite data feed coupled with automated order entry and trade monitoring for unmatched speed. => Safety: Designed to have multiple fail-safe systems to ensure reliable operation. I was unable to find an existing system that met these needs. Creating such a platform became my goal for the past year. My partner and I began by integrating satellite data feed from PC Quote into a real-time expert system. Using the expert system, we were able to scan the Level II data and time/sales data for all 5000+ NASDAQ stocks based on any combination of parameters or market action that we could define. The expert system evaluates whether to initiate a trade in a particular stock every time a marketmaker adjusts a quote price or a new trade is reported. This occurs several hundred times a second! This has proven to be beneficial, since it can be very difficult to find the “perfect” entry point manually, watching only a few stocks at a time. As a result, you can be extremely particular and specific in holding out for the exact trade setup you are looking for. The computer can then generate entry and exit points, strictly based on the rules and conditions that are programmed into the system for the trader. When the right conditions are found, the order is placed instantly. We have incorporated automated order placement and trade management to enter trades much more quickly than is manually possible. I believe automated order entry and execution provides a tremendous advantage to the daytrader, because of the time it saves in getting an order to the marketplace. I have programmed into the software an order routing system, which instantly determines whether to enter a SOES limit order, SOES market order, SNET marketmaker preferenced or ISLD order based on the Level II data. The proper order is instantly evaluated, placed and executed. Example of an Automated Trading System The following is a simplistic example of how a trading system can be programmed into our trading platform for automated trading: If price of Stock > price of Stock 5 minutes ago AND If price of Stock > 10 AND If price of Stock < 30 AND If price of the Nasdaq index > Nasdaq index 5 minutes ago AND If the percent of trades in Stock during last 1 minutes at ask > 75% AND If percent of marketmaker changes that were increases in Stock in last 1 min > 60% AND If the total number of trades in Stock in last 1 minute > 15 AND If number of trades in Stock in last 1 minute > Greatest number trades in any minute in last 30 minutes AND If the spread of the Stock < or = 1/8 point AND If the range of the Stock in the last 30 minutes > ½ point AND Etc., etc. THEN ==> Buy Stock using SOES The rules to exit a position can be equally straight forward: If the price of the Stock < entry price – 3/8 point OR {Stop Loss} If the price of the Stock > entry price + 1.0 point OR {Profit Obj) (The Market Maker Momentum of the Stock < 40% AND The Trader Momentum of the Stock <35%) Etc., etc. THEN ==> Sell Stock using limit order at inside ask This simple example of a trading system shows the type of flexibility that the platform can support. Once a trader configures his or her system, the program will scan every stock for their rigid set of conditions, identifying trade opportunities and executing trades as instructed. This enables the daytrader to reproduce his/her own profitable trading strategies dozens or even hundreds of times a day, with lightening speed and complete accuracy in following their system. This platform enables the trader to leverage their system into many more trades than they could accurately complete manually, multiplying their profit potential. Summary The key to success is to translate a successful daytraders system into a set of rigid conditions that the computer can monitor. In addition, new trading ideas can easily be developed into test systems. This is where the paper trading feature of this platform can be an enormous benefit. Paper trading can be used, not only validate the potential profitability of a system, but also help to optimize the best values for the parameters used in the system prior to implementation in real-time trading. The advantage of this daytrading platform is the power to monitor thousands of stocks simultaneously against a rigid set of entry and exit conditions, with the speed of near instantaneous order-placement. Because of this, I believe this platform gives serious daytraders a huge edge to compete with marketmakers, as well as fellow traders. -Eric Ericpatterson@home.com