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Here is a random question for my fellow Algo traders out there. I'm pretty sure we all started out as discretionary traders but as of the start of your algorithmic trading and only taking that into account how many years have you been in the Black vs Red?
For me I just started so I can honestly say I only have 1 year in the black and that is the one year I started algo trading.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,399
Thanks Received: 10,225
FYI I focus on energy now because I spent my career working for energy traders. My first job out of college was working for an oil trading company. Since then I have worked for several other large energy traders before going out on my own 12 years ago. So it's not that I choose the energy contracts - it's just that I know the most about them.
The Oil complex is a nice thing to trade because it has a decent amount of volatility without being crazy volatile. It also has some nice long trends which can be captured. You need to be careful though when diversifying because the contracts are all highly correlated, so if your trading similar systems diversified across the CL-BZ/BRN-HO-RB you'll probably find they all make and lose at the same time.
Re: Where is energy going? Natural Gas market is growing in size, and becoming more international as the LNG market grows. CME/NYMEX Natural Gas is a very robust market. (It's very weather dependent though, and you can see some crazy overnight moves when the forcasts change). There are also Power/Electricity markets you can trade. There's several issues with Power though. Firstly it's all on ICE, which is both expensive to trade and difficult to find software and brokers that will allow you to trade it. Secondly it's a wholesale market, so in the Eastern US the standard trade size is 50MW/hr 5x16 for a month. So they standard contract is about 16,800 MWhrs, which if we say power is $35/MWhr equates to a contract size of $588,000! Finally there's no National Benchmark price in power like there is in most other commodities. PJM which originally was the Pennsylvania-Jersey-Maryland power system, but now stretches a lot further geographically, is I believe the biggest Power System. While they do have a highly trade popular product called "PJM Western Hub" the basis risk between that, and locations within PJM (never mind other locations) is large enough to make it a mediocre hedge. The problem with power is the the supply (often in rural areas) is rarely close to the demand (high population urban areas) so it can be a very fractured market. (Think wind generation prices in West Texas going negative at night, but Houston prices at peak demand in the summer hitting the $1000 cap price). CME/NYMEX do have futures contracts, that 20 years ago were reasonably successful, but have unfortunately faded into oblivion since. Question is will their be other Power Futures Contracts as we move away from Oil and Gas?
Started late 2017. Ran 20k to 70k within a year. Added new system. Both tumbled back to near 20k level. So 2018, 2019 black but not by much. Polished original system, jumped back in on may of 2020. Finished 2020 with black.
Great experience 2017 to 2019 but only 2020 should be considered black. So same with you. 1 year. Would love to have this conversation once again in Jan of 2022. Thanks for your journal.
For my entire trading life I have been black, thankfully. I have been black and red both discretionary and automated, as there has always been some of both styles in my trading. This year I expect to be in the black, but I have some long-term discretionary positions that will be closed as I attempt to automate everything.
I follow Top Traders Unplugged and listen to their podcasts regularly. There is some great insight into how professional hedge fund managers (fully automated system traders) perform. They are not always in the black. Last year was very interesting to hear them, as they only hit the black in December. Highly recommended. It has brought a lot of peace to me.
I was wondering if you have looked into carbon offset contracts, given your energy background. On the surface it seems like it may be compatible. I'm not sure there is enough volume (it might be like lumber), but it may be something to look into.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,399
Thanks Received: 10,225
The California Ones? Only looked at them from a yield trade perspective. Buy spot credits, sell 1 year forward futures, collect 5-7%. I looked at it once but can get a significantly higher yield with Bitcoin.
It has been a good while since I wrote in my journal here. Things have been going okay with my strategies. Currently trading multiple strategies across several different markets.
The strategy I am currently working on involves using tick data. I have identified a couple of questions I need to answer in order to do proper backtesting. One would be how much tick data tradestation offers? Another would be are there resources that supply unlimited tick data for backtesting?
I have heard that using tick data to backtest can be cumbersome and as part of my strategy factory club I cannot submit a strategy that isn't time based. I am very curious about whether the tick data can be relied upon for building winning systems.
tick data has always made sense to me and I really don't see why it can't be used to create a winning system.
Tick data seems better fit for intra day systems and that is my primary focus right now.
If anyone reading this journal has used tick data as a primary chart analysis window and had success and/or failure please feel free to comment in my journal.
I think I found a system that I spot checked over various different months using a 1440 tick chart of the ES and I am quite pleased with the results so far. The best and most attractive part of the system is the very small drawdown amount. Could this be too good to be true? Probably but I will keep testing post on here my results.