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Statistics Based Strategies and Ideas! Working -or- Almost Working! Using R

  • Dec 4, 2011 · 9:30 AM

We will continue to explore and share more ideas...

- Trading Strategies

- Programming

- Servers and Setup

- Using Options




LAST MEETING RECAP (Thank you Dmirty for taking notes!)



Sent: Sunday, November 13,[masked]:39 PM
Subject: RE: Links and ideas

Thank you all for a great meet-up as well.
Here are my draft notes on some of the topics discussed (in no particular order, feel free to revise/modify/add/post, etc).
I am good with the December 4th date for the next meeting.

(1) Software:
-Ninja Trader (can interface with broker and Trade Station)
-Algo Trader (open source java based software - may be snatched up by hedge funds in the future), fixed protocol, data feeds from IB
-Linux-based systems, server (Ubuntu - Anne) - editors - eclipse, notepad - Kris has run this server for web hosting.
-Trade Station (currently has error with simulating trailing stop execution realistically, otherwise accurate in live trading).
-MATLAB - Daniel has tried and thinks is good for graphing and testing, but not necessarily trade execution.
-IB - paper account should have better data than demo account. (Daniel)

(2) Related Trading Groups
-Machine learning (this Tuesday/Wednesday) - Ben
-another trade station developer mentioned by Kris (Joe Krutsinger?)
    -simple buy on Monday, (S&P.P) sell on Friday close (equity curve since '82) is good (has recovered '08 losses).
    -$500 stop loss, only profitable about 35% of time, but with high gains every once in a while.
-IBD CANSLIM - Naperville has large group

(3) Strategies:
Stock portfolio -
several target prices of stocks listed by Jenny (not Craig) - how to play - options? buy calls? wait for lows?
-Commodity futures or single stock futures arbitrage (Daniel)
-Options trading (Ben), easier management of stop loss (compared to getting stopped out before reaching profit target)
-40/40/20 weighted next Center prediction strategy (Ben), with RSI input (Kris)
-new idea: returns standard deviation testing to predict next win/loss? (Manny)

(4) Misc. Notes:
-Chicago One (single stock futures contract?) - mentioned by Daniel
-Harvard HFT firm set-up criteria
-Trade Station only allows 3 days worth of tick data
-IB demo does not provide time stamps for tick data, but Daniel mentioned the paper account does.
-Manny - note about learning when to turn system off (based on market conditions) - sounds similar to Trade Station Thermostat strategy
-Ben's sorting algorithm - data base time series, etc.
-Kris - set up account in Australia to collect 4% interest (but need to incorporate additional fees)
-statistical bell curve for range of bars (could be based on volume also).
    -base on that last 60 minute bars, as curve completes, expectation of next bar to fall in a certain range.
    -if news event - paradigm shift, curve is shifted, what is probability of reversion?
    -how to design strategy around this?
    -high short term interest may last 1 month or 2 months, but not 1 year.
    -find "hard to get" stocks with high short term interest.
    -violation of put/call parity
-Kris - notes from recent futures conference:
    $250,000 minimum needed to set up an HFT practice

(5) Some Next Steps:
-options strategies back-testing (need to check CBOE (at a recent seminar this summer, one of the exchange operators mentioned this data is free to the public upon request).
-data feeds (Gain Capital has historical intra-minute bid/ask FOREX data files) - lots of data.
-how to obtain convergence between historical back testing and live trading with Trade Station?
-investigate Algo Trader deployment and programming for future use as server-based platform
-how to devise a trading strategy involving statistical curve shifts due to black swan events

(6) Next meeting in December





Subject: Re: Links and ideas

The following is the link to great video on trading strategies:
It gives some ideas of what is possible / available and what to look for when designing trading strategy.
The Algo-Trader platform code could be found here:
It might be an over-kill to start trading, but it’s always nice to have code like this available just in case :)
Next few days I will try to generate some statistics for Estimate of Center strategy.
I got some great ideas how to do it at our meeting.  Same research could be used for various statistical systems.
Here is some info on RSI(2) system and how to use it:
I am researching Ninja platform. Here is my starting point:

Just wanted to add link for The R, a very capable MatLab alternative (Matlab licenses are soo expensive!)
It is a very capable statistical analysis tool; I would like to learn it one day...
Maybe someone within the group knows MatLab or R and can prepare little presentation how to use it?
R is FREE and available here:
And YES, it runs on Linux, MacOS and even Windows! :)
Attached is pdf Matlab and R reference guide (July 2011).

Thank you all for attending, it was truly great meeting.
Please let me know if Sunday of December 4th would be good to hold next meetup.
Kris Makowski
"There are only 10 types of people in the world:
Those who understand binary, and those who don't"

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