
Ask HN: Automate Stock Trading? - nikhilsaraf9
I&#x27;m building an automated stock trading system for my personal investments. The plan is for the trades to be based on data ingested through past stock performance, current trend, fundamental analysis, performance compared to similar stocks, and other data sources added incrementally.<p>There is a learning curve in which I&#x27;m developing the initial algorithms that will help gain an advantage over simplistic human investing with the computer providing a more deterministic risk-reward management system that it will apply. Once this has been achieved, the goal would be to increase the ROI and maximize the final take-home profit (minimize tax where possible to increase effective ROI). I&#x27;m validating algorithms with a back testing approach, currently obtaining data from Quandl.<p>I&#x27;m planning to host this on AWS and use a combination of Python and R. I haven&#x27;t decided on the datastore yet, but I&#x27;m open to suggestions.<p>Does HN have any suggestions or any tips from someone who has attempted to do something like this in the past, if so, please also briefly describe your past experience and current position with the project?<p>Thanks!
======
exelius
This is a bad idea.

The "simplistic human investing" you're talking about probably accounts for
0.01% of trades. The vast majority of trading these days is algorithmic, and
the HFT guys will eat you for lunch.

What you won't see in back testing is how the market reacts to your strategy.
The market isn't something that stays static: your activity changes things in
subtle ways, and I guarantee there are people smarter than you who have
designed algorithms to detect and exploit trading strategies such as yours.

Algo trading is very dangerous if you're not coming from an investment finance
background. Just be very careful.

~~~
riveralabs
I agree with the fact that it's very unlikely that I can develop a mechanical
system that would beat algorithmic trading. The good news is that I don't have
to. That's why I'm a discretionary swing trader. In my personal case, trading
is about learning how to fish. Learning a non computer skill that I can use
for the rest of my life.

Even if it sounds cruel. With enough time and hard work, you can train
yourself to detect the pigs getting slaughtered by the professional traders
and take a bite of the action. That's what swing trading is all about.

That being said, it's far from easy. It requires a lot of hard work and
determination. Reading books is a good start. The book "Trading Your Way to
Financial Freedom" by Dr. Van K. Tharp is required for any modern day trader.
The most important lesson from the book is probably that you have to always go
into a trade knowing how much you are willing to loose on that trade. Using a
stop and respecting it should be deeply engraved into your DNA.

But reading books is not enough. Getting a proper trading education is
important. The average trading course will cost you anywhere from $2,000 to
$5,000. With so many get-rich-quick schemes on the Internet is hard to find a
serious an respected trading education program. They are out there. A good
place to start would be Trader Planet. They have a list of the Top Trading
Schools.

Why pay so much for a trading course? Because in the long term it will save
you time and money. In the book "How I made $2,000,000 in the Stock Market" by
Nicolas Darvas. The author spent many years of failure paying tuition to the
markets until he found his way. Many people read this book and get fascinated
by the big number. The fascinating part about the book is that in the 1940s
and 1950s this guy created his own form of pseudo technical analysis. That
system is what made him the $2,000,000. He spent a lot of time an money
developing the system and eventually worked out for him. Keep in mind that
Moving Averages started to get used in trading in the 1960s (If I'm not
mistaken).

The moral of the story is that spending $2,000 or $3,000 in advance for a
proper trading education will save you a lot of time and money.

People with little or no trading experience should not be developing
mechanical systems and use them to risk real money. Wanna do it for
educational purposes, sure go ahead, but don't risk any money. That shouldn't
stop you from diving into the markets though. Once the market bug bites you
there's no turning back. You just have to do it the old fashion way. In my
case, by reading charts. As a software developer I think technical analysis is
the only way to study the markets because that's how my brain is wired.

~~~
exelius
I'll put it this way: I went to a top business school (which cost a lot more
than $3000), and my finance professors were former traders, federal reserve
governors, investment bankers, algo traders, etc. Without exception, they
recommended a buy and hold strategy for non-institutional investors. Buy
companies you believe in (or better yet, index funds), and hold them until you
need the money. And this was in classes where they were teaching us investment
strategies! The game is rigged against you; as an individual investor your
information will always be 3-5 seconds out of date, and your trades will get
thrown in the back of the queue behind the institutional investors. Any
strategy that relies on market timing is doomed before you even start.

Professional traders (hedge funds, etc) can get away with risky strategies
because they're balancing risk. For every insanely risky, 30x leveraged trade
they make, they also hold metric fuck tons of US treasuries. You also never
invest in one hedge fund; you invest in 30 or 40 hedge funds because most will
lose money. The guys running the funds make their money off of fees because
the return of the funds is usually based on economic factors more than
'alpha'.

Trading has changed a lot since the 40s and 50s. Modern finance wasn't really
invented until the 80s as the relationship between debt and equity became much
more fluid. If you really want a proper investment education, I would suggest
a real education in the form of a computational finance degree as offered by
many of the top quant business schools (CMU, MIT, etc.) There you can learn
about the leveraged trading strategies that HFTs and algo traders use, why
they work, and how to exploit them.

The big traders have a word for individuals who try to beat the market:
suckers. There is no arbitrage, and even when there is, someone else will beat
you to it because your access to the market is inferior to theirs. It's
fundamentally unfair, but it's what happens when you have a revolving door
between the federal reserve, the SEC and the top investment banks. You're
playing a game with asymmetric information from the losing position against
very skilled players. If you beat them, it's dumb luck. You're not going to be
able to do it consistently.

The guys hosting seminars on investment strategy have found a way to
consistently make money: by hosting seminars on investment strategy and
charging $3000 to $5000 to attendees. If they had a truly ironclad way to make
money consistently in the market, they wouldn't need the money from the
seminars because they would be pulling in tens/hundreds of millions a year
running a hedge fund or prop trading group.

------
brc
I once set down this path but stopped.

Your big problem is that the future market doesn't look like the past market.
There is a statistical error inherent in excessively curve fitting past data.
You could develop a system which says you'll return 25% per year and then lose
100% in he he first six months. So don't fall into that trap of excessively
back testing.

What you should be spending time is your money allocation algorithms - the
very same set of trades can return high amounts or wipe you out depending on
what % of your trading equity you allocate. This is something you can test -
by simulating actual trading returns - both upside and downside.

I'm not sure if you're looking for trading advice or development advice, but I
woudo recommend these books while you are doing system development:

\- [http://www.amazon.com/Trade-Your-Way-Financial-
Freedom/dp/00...](http://www.amazon.com/Trade-Your-Way-Financial-
Freedom/dp/0070647623/ref=asap_bc?ie=UTF8) \- trade your way to financial
freedom by Van Tharp

\- the entire 'market wizards' series ([http://www.amazon.com/Market-Wizards-
Jack-D-Schwager/dp/0887...](http://www.amazon.com/Market-Wizards-Jack-D-
Schwager/dp/0887306101)) - there are three (or four?) books in the series, all
are worth reading.

The final problem is designing a system which you truly understand, which you
are sure gives you an edge. And which you are willing to stick with if there
are periods of high drawdowns.

Also remember you are up against people with very deep pockets and huge
computers and phd guys working on there same thing.

It's a great intellectual puzzle and a worthy challenge, but make sure you
know what you are getting into.

~~~
nikhilsaraf9
Thanks for the advice. I will definitely err on the side of caution and not
get caught up with the backtesting and over fitting. Allocating resources
(funds) will probably play an important role to manage risk in the system.

At the end of the day, I'm trying to answer the question: can you make money
in the stock market with a low-touch (eventually no-touch) approach with the
help of advanced software and analytics. Hopefully the answer is yes ;-)

~~~
lmgtfy
>> At the end of the day, I'm trying to answer the question: can you make
money in the stock market with a low-touch (eventually no-touch) approach with
the help of advanced software and analytics

The answer to this has been a resounding "hell yes" for decades across
IB/HFT/AlgoTrading shops. The only thing this exercise achieves is whether
"you" personally can make money with a low-touch approach using software.

~~~
gaius
I don't know if you've ever worked in a HFT shop but I am pretty sure those
guys aren't just goofing off while the robots print money for them.

~~~
lmgtfy
Well, they're usually revising/improving their models while the robots print
money today to ensure that the robots can print more money tomorrow. The
frequency and depth of the human input varies based on the kind of strategies
employed (macro/statistical arbitrage etc). Moreover, successful models take
competitors' potential models into account which (like everything else) is a
moving target.

------
jacquesm
If I could just give you one piece of advice it would be this: don't do this.

A bit longer: You're a pig headed for the slaughterhouse. Please do it 'for
play money' only for the first 5 years or so, if your method makes money over
that period then set yourself a goal and if you reach it _stop_.

~~~
nikhilsaraf9
If you could please shed some light as to why you hold that opinion (past
experience etc.), it would be of great help!

~~~
marvin
Beating a stock market index is a zero-sum game, and the large players in this
market have hundreds of millions of dollars and huge manpower invested in
making money of small players like OP. I suppose it's possible in principle to
be smarter than them, but that's the bar.

~~~
repsilat
It's zero-sum over the short term, but not over the long term -- "beating the
index" is (kinda sorta) another way of saying "dragging the index towards
efficiency." It means investing in stocks that are going to perform, which
(kinda sorta) like investing in companies that will be successful, which
increases the size of the pie.

Of course, with the amount of money the OP is likely to be investing, it's
completely sensible to ignore market impact.

------
DanBC
"A mathematician plays the stockmarket" is an interesting read of a smart
person who made a bunch of mistakes and lost money.

[http://www.amazon.com/gp/aw/d/0465054811/ref=mp_s_a_1_sc_1?q...](http://www.amazon.com/gp/aw/d/0465054811/ref=mp_s_a_1_sc_1?qid=1424599137&sr=8-1-spell&pi=AC_SX110_SY165_QL70&keywords=mathematician+plays+stockmarket)

~~~
nikhilsaraf9
I haven't read the book. From the description on Amazon it seems the
investor/mathematician let his emotions come in the way of his investment
decisions which led to him losing money. I think that's a risk we run by
providing that human touch, which sometimes may even help us if the software
is making stupid decisions. My goal is to build a fully-automated system (no
human interference) that makes "confident" decisions based on statistics and
hard numbers.

~~~
yummyfajitas
Your automated system will require human input. I lost a bunch of money in Jan
- I saw a huge drawdown, discovered a fixable flaw in my strategy, panicked
and closed my positions. Human inputtime - do I close positions and shut down?

Had I stuck with the flawed strategy, I'd have made (a small amount of) money.

Dont think that you dont need to manage your psychology simply because you are
running an algorithm.

~~~
nikhilsaraf9
Yummyfajitas, that's exactly why I do not want human input. Also, I'm not
trying to make money on every bet, but to make more money in my winning bets
(less fees) than I lose in my losing bets.

~~~
yummyfajitas
What I'm trying to convey is that you do have human input even for a pure algo
strategy. If you acknowledge it exists, attempt to minimize it and manage what
remains, you are far less likely to have it cause you problems.

~~~
nikhilsaraf9
That's fair enough. Total autonomy can be pursued, not necessarily achieved,
so better to accommodate and minimize the imperfections

------
balazsdavid987
Just a word of caution: the profitability of stock trading, regardless of the
timeframe (high-frequency, daytrade, week long positions), heavily depends on
access to information. So even if you build a system that mathematically is
better than those built by a team of physicists at large financial
institutions, it may easily under-perform the market due to its limited access
to data.

~~~
nikhilsaraf9
Yes. That is a massive handicap that the system will have (it's not going to
be co-located and probably won't have access to early information, etc). I'm
wondering whether it's possible to develop a system that accommodates these
deficiencies while still ending up on top.

------
sek
Let's assume your strategies work, then you will earn by a magnitude more by
doing this for a trading company than you will ever with your own funds.

You can go down that road, but this a whole full time career and it usually
takes years to be good enough at it.

I could recommend this book ([http://www.amazon.com/Building-Algorithmic-
Trading-Systems-W...](http://www.amazon.com/Building-Algorithmic-Trading-
Systems-Website/dp/1118778987)) to get an understanding for the craft.

------
Spitfire777
I used to do it with bitcoin, but not to get rich, just for curiosity.

The most algorithms is just chart reading, playing around with periods,
standard deviations etc. You can achieve something really quickly, but it only
works if the market jumps up and down within a short time period and stays on
the same level if watching a bigger time frame. What if the market drops by
90% suddenly because some bank decided to do something stupid?

The next time I won't work on HFT, but more of risk reduction and long-term
investments: \- Markowitz diversification model \- Multi-Market trading, trade
on market differences

Another interesting approach would be to exploit trading algorithms, since
99.9% of all trades are algo trades.

What you theoretically could do is use popular trading algorithms, develop a
tool to monitor their decisions, adjust decisions weights and see how a
simulated market performs on comparion to the real market. Now that you have
something like a "slave" market and can go on to the next step and calculate
scenarios e.g. 5min ahead and can 99.9% predict where the market will be in
5min.

~~~
kasey_junk
> Now that you have something like a "slave" market and can go on to the next
> step and calculate scenarios e.g. 5min ahead and can 99.9% predict where the
> market will be in 5min.

What most algorithmic trading models that are looking to prey on other algos
do is either wait until their model says the market is already in some bad
decision state or move the market in some way to make the bad decision state
more likely.

------
rl3
I wrote a somewhat long-winded comment on this topic a while back, you may
find it useful:

[https://news.ycombinator.com/item?id=6832589](https://news.ycombinator.com/item?id=6832589)

The _tl;dr_ version of it is:

Risk management, specifically position sizing, is commonly neglected and yet
extremely important.

Psychology is everything, regardless of whatever your approach may be.

------
kasey_junk
You have not given nearly enough information to give any reliable tips.

Start with a few questions. How often are you targeting trades? Do you
anticipate trading thousands of times per day, a few times per day, a few
times per week, a few times per month or a few times per year? Know that there
are sophisticated algorithmic trading systems in all of those spaces.

Once you know how often you will be trading, you can make more appropriate
decisions about execution platforms. What kind of data feeds do you want to
use? How will you get the data into your systems, how will you get the outputs
out of your system. How will you translate those outputs into orders? Who will
take your orders? As an aside, most brokerages will want to know if a computer
is making all the trades and will either outright ban fully automated trading
or will want a kill switch (see the TSA for your broker of choice).

This leads us to the actual hardest part about automatic trading, operational
risk. What are you going to do to prevent your system from making out trades?
What is your shut down procedure? How is it triggered? How will you monitor
the system? Know that managing automation risk is the last mile of human
intervention in the system, and that lots of people have lost a lot of money
by not intervening soon enough, or intervening too soon.

You also need to have a target benchmark to compare to. What are you going to
benchmark against? How often are you going to evaluate against that benchmark?
How long will you allow your system to underperform the benchmark? There are
long game algorithmic trading systems that have built into their capital
allocation models >10 year underperformance against benchmarks for instance.

Finally, ask yourself, what inefficiency are you taking advantage of, that
will allow you to profit from trading? What is it that you bring to the table
that isn't already there? Once you honestly assess that, ask why wouldn't that
same efficiency be more valuable in some other field that is less crowded
because automatic stock trading is a very low percentage game right now.

------
sylvinus
This old HN thread may be relevant:
[https://news.ycombinator.com/item?id=4748624](https://news.ycombinator.com/item?id=4748624)

~~~
nikhilsaraf9
Thanks for sharing, seems very close to what I'm trying to do. Will give that
a thorough read!

------
smoyer
I started doing this after reading one of the Motley Fools' investment books
(Rule Breakers - Rule Makers) ... fortunately I never asked it to trade real
money. A few years later and MF has completely disavowed the techniques in
that book (and I would have lost whatever I put it).

Now I just throw darts ... unless you can get some insider knowledge like the
big boys, you'll never be the early mover.

------
nikhilsaraf9
I want to clarify, the intention of this system is specifically to NOT be a
HFT system because I'm aware of the large handicap associated with inferior
data available at slower speeds. It's intended to primarily help with stock
picks since it can look through more data than a human can. This would involve
both fundamentals and technical analysis. The most frequent trades would be
once a day and may end up being closer to once a month. It is intended to be a
low-cost solution. I would like the trades to be done by the system but the
approach will not require it.

Based on some of the comments it seems such a system will be the underdog and
will be the prey for the large HFT shops. And that's one of the risks of such
an experiment. Once I put in real money into this (not too much, but just
enough to not be consumed by the fee) there will be a hard point after which
I'm ready to throw in the towel. I think of this more like an investment
management software that has more knowledge than myself (various trading
techniques, tax laws, etc.).

------
anovikov
Someone can please give me some trustworthy, scientific reading material to
give people asking me to proof the point 'systematically beating index
performance on the stock market, using only public available data, is not
possible'? Intuitively i understand this is true, so no need for holywar. Same
also applies to commodities trading.

~~~
brc
You don't need scientific proof or reading material - the theory you are
trying to prove is wrong.

Just look at the number of billionaires who have decades long 20,30,50%
average returns - not possible by chance.

The efficient market hypothesis believers say that these people were lucky.

People who say that don't understand probability.

The probability of winning big one year is probably not that rare - lotto win
sort of numbers, and given the number of players and the number of iterations
- easily explained away.

However, the existence of scores of individuals who have been able to profit
for long periods of time completely destroys the efficient market hypothesis,
because the hypothesis says they can't exist.

Take one single example ; Richard Dennis. He started off with $1500 and ran it
up into hundreds of millions. He then taught a group of people who had zero
trading experience his system and then they went off and made hundreds of
millions (some are still going).

[http://en.wikipedia.org/wiki/Richard_Dennis](http://en.wikipedia.org/wiki/Richard_Dennis)

That is completely non-random outcomes. The efficient market hypothesis is
something that academics wet themselves over while other people laugh at their
theories and make millions.

Essentially, for 'systematically beating index performance on the market using
publicly available data is not possible' to be true, then the scores of people
who have done just that, over decades, cannot exist. And yet they exist.

~~~
kasey_junk
Richard Dennis is a weird example to use, given that he ended his career
losing tons of _other peoples money_.

If anything he is a perfect example of luck...

~~~
brc
Well, no.

The fact that Richard Dennis chose to stop taking customer money after a bad
loss in the 87 crash proves nothing.

The EMT/EMH states that because all the information is in the he public
domain, returns above market over time are not possible. Anyone with the
slightest interest in human nature understands that two different people with
the same information can come to two entirely separate conclusions. Any glance
at election results will tell you that.

Richard Dennis developed a system that produced outsized returns over a long
period of time using public information. He then taught this system to others,
who then used it to also make outsized returns using public information. Thus
disproving the hypothesis.

The fact that he gave back a small portion of his total returns in a
particular market event doesn't change the basic facts. Even if his strategy
no longer works, the fact that it did work for a long period of time disproves
the theory. He was able to use public information to decide to abandon the
strategy when it no longer worked.

~~~
kasey_junk
I certainly am not the person to backup the EMH (my complaints about it are
more about the lack of provability/usefulness) but you are completely
misstating some very central points about the EMH and more specifically about
Richard Dennis.

1 - no version, even the most strict, of the EMH claims that returns above
market over time are not possible. The claims are about the prices of assets
and their relation to information. So even a very strict interpretation of the
EMH wouldn't say you can't make above market returns over time, only that you
can't do it because you know something no one else does. Random movements or
other non-knowable events are not part of the EMH.

2 - all EMH versions talk about _risk adjusted_ returns. So if you place an
incredibly risky bet, that pays off, that does not violate any form of the
EMH. The Dennis system was particularly risky, especially in comparison to
other market participants like him.

3 - Dennis' _system_ did not perform well over a long period. The _system_
does not perform well past 1986 and was only first codified in either 1983 or
84. Dennis performed better over that time, but his system did not. This is
evidence that he was lucky, not beating an efficient market. Even if we take
the most charitable view of Dennis' system, not that it was luck, rather it
was some new found previously unknown information, that _backs up_ less strict
forms of the efficient market hypothesis. The market responded to the actors
in it finding an inefficiency by making that efficient to the point of the
opportunity disappearing.

------
toddkazakov
My 2 cents - don't reinvent the wheel. Use quantopian.com - it has great
community, where you can learn a lot. Their trading system called ZipLine[1]
is open sourced, so I guess you can extend it to fit your specific needs.

[1]
[https://github.com/quantopian/zipline](https://github.com/quantopian/zipline)

------
koalala
Don't get discouraged by the negative comments. It's completely possible to
make a profit (with low risk) without resorting to HFT.

I'd recommend you read Quantitative Trading by EP Chan for a great overview of
the basic methods and some example implementations.

Disclaimer: I've done exactly this successfully for >2yrs now.

~~~
jacquesm
> Don't get discouraged by the negative comments.

No, of course not. Jump in feet first with all that you've got and to hell
with common sense.

> It's completely possible to make a profit (with low risk) without resorting
> to HFT.

Yes it is. For a while at least.

> I'd recommend you read Quantitative Trading by EP Chan for a great overview
> of the basic methods and some example implementations.

Reading is always good, second that.

> Disclaimer: I've done exactly this successfully for >2yrs now.

I know gamblers that have been on winning streaks too. Unfortunately that's
not how the story ends, especially not for novice gamblers.

It's nice you have found a way to consistently beat the market and I really
hope that you're outperforming the lowly index funds but without more data
'successfully' is awfully un-specific.

I made some money in the stockmarket too, but I'm not going to dress is up as
intelligence, I'd rather admit that it was dumb luck.

------
SEJeff
I've worked in the electronic trading aka hft market now almost 7 years. The
big boys are optimizing their trades down to the nanoseconds, they are
spending big money on bleeding edge network technologies, colocating their
servers _inside_ exchanges, etc.

If you expect to compete with them on AWS save yourself the loss and just stop
right there. However, if your strategy is more or less buy and hold for weeks
/ months then this doesn't sound entirely unreasonable. From my experience,
simply getting into this industry as a serious player is roughly a 10-12
million investment, and that is starting very very small in only a few
exchanges.

------
jshaqaw
Use paper trading for a while on a platform like Interactive Brokers before
going live. You will find it's unlikely you discovered the holy grail but hey
maybe you have. Just be wary of a common trap for both beginners (excusable)
and longtime market pros managing billions (not so excusable) - lots of
strategies look great while testing because they have a payoff matrix which
yields +1$ 95% of the time and -$1000 5% of the time. Obviously this is a poor
ex ante bet but you are unlikely to empirically observe/discover the asymmetry
at first when it just seems like you are printing free money.

------
bussiere
I'am working on this.

Only using python , ipython rethinkdb and postgresql.

We are working on a event driven fund to find pattern, but we still need human
at the end (the program found pattern and we try to find why and if they are
reproductible).

Good luck :)

~~~
nikhilsaraf9
That's very interesting. I'm trying to integrate the concept of "special
events" like earnings or dividends or announcements into the mix. Although
that isn't the driving force for what I'm trying to do. I'd be interested to
learn how it works out for you guys.

~~~
bussiere
we are event driven here, our program help us to find regular pattern drive by
event as annual press conference (we buy before and sell just before) , fda
approval for biotech, black friday for amazon , or cultural event (chinese new
year).

You have annoucement, but don't forget the regular one.

We are still working on this (we are around 2% per month) but i'am open to
share.

Visibly i'am not the only one to do this :
[http://www.reddit.com/r/stocks/comments/2v7fvk/anyone_make_l...](http://www.reddit.com/r/stocks/comments/2v7fvk/anyone_make_living_daytrading_stock_market/cof4ulq)

Mail me if you want to discuss or share

bussiere AT gmail.com

regards

------
briHass
Even though backtesting is only of limited use, you should try your algorithms
on fresh (you haven't previously used them) time periods and see what types of
returns you can get. When I did this with my algos I was playing with, even
though it seemed positive, when I accounted for the cost of the trades and the
cost of the data (near-real time market data is damn expensive), I wouldn't
come out much ahead of a simple buy-hold index fund approach.

Invest the minimum amount you can in this project to learn that it isn't a
great idea.

------
kewin87
You should have a look at MetaTrader. It provide tools for back-testing and
dynamic spread etc..

I have been building also my own platform (with nodejs as for high IO), but
you easily loose focus when you have to build it ALL by you're self..

(opensource) platforms like MT4 / MT5 give you more time to spend on actual
alghorithmes, then on data structures etc

------
ndcolorado
Check out omnitrader.Com as a potential platform for building your algorithms.
Whilst there also check their product myomnivest. If you want to go big-time
as I have, check into their Nirvana club. Not cheap but their auto trading
algorithms are extremely sophisticated.

------
SandB0x
There is a nice review of related methods in the book "A Random Walk Down Wall
Street"

~~~
nikhilsaraf9
Seems highly rated and a classic. Will get myself a copy.

------
bussiere
One of my friend is working on a same project for a big company and some of my
friends are interested in this.

I'am thinking does anyone will be interested by a specialised forum or a
subreddit to share our experience and tips ?

------
bussiere
I'am thinking btw to make a portal / forum / subreddit about this topic.
Anyone interested ? What format will you prefer ? Subreddit / special forum ?

------
gaius
_gain an advantage over simplistic human investing_

What makes you think there are any simplistic humans in the market for you to
take advantage of?

~~~
raverbashing
Oh there are a lot.

They're the first to be taken advantage of

~~~
gaius
... As the OP is about to discover, the hard way.

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curran736
Would you like to team up and build something? I have some ideas that can help
build better algorithms. curran736 at gmail.com

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njloof
Look for patterns of insider trading and hop on. Oh, and trade offline
portfolios for much longer than you think necessary.

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billconan
I'm curious how you will link your program with your broker account? do they
provide rest api for stock trading?

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Red_Tarsius
Great work! I haven't done such things, but I'm curious: what books/papers is
your software based on?

~~~
nikhilsaraf9
I haven't based this off of any existing papers yet, I'm intending for it to
start off as fresh research, and depending on how it goes, maybe include/test
theories from existing papers. Do you have any papers that you would
recommend?

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raverbashing
The only thing you're going to automate is the emptying of your account.

> I'm planning to host this on AWS and use a combination of Python and R.

Yeah, great idea. NOT. Unless you're doing something like tens of trades per
day, or less.

~~~
nikhilsaraf9
@raverbashing, One trade a day, maybe even less.

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waps
You may want to take a look at
[http://quantopian.com/](http://quantopian.com/), who make an engine that does
just that. A lot of brokers actually support this.

The reason appears to be that there are lots of stock trading packages that
people want to use (and to be fair, most brokers' interfaces suck somewhat.
Also one interface for 2-3 brokers sounds appealing to me).

Here is an article about one such trading API:

[http://www.quantstart.com/articles/Using-Python-IBPy-and-
the...](http://www.quantstart.com/articles/Using-Python-IBPy-and-the-
Interactive-Brokers-API-to-Automate-Trades)

Most API's also let you play with the "fake money" accounts of the brokers.
But keep in mind that they usually cheat on transaction costs in those modes.

You may want to read a lot of the algorithms on Quantopian. To be frank, the
only one that really makes sense to me is the "auto-rebalancing" approach.
What this does it it keeps your investment at what you set it.

Say you invest 50% in automotive stocks and 50% in nasdaq stocks. Nasdaq goes
up 10% -> it sells 5% of the profit and invests it into automotrive stocks.
This is one of the few algorithms that seems to :

1) beat the market

2) actually spreads risk around (or it seems to me it does, depends on your
investment spread I guess)

~~~
nikhilsaraf9
I had actually looked into quantopian when I was getting started, but decided
not to use that for my primary source of backtesting because they place
limitations on users since that reduces pressure on their systems, allowing
them to scale. This restricts backtesting ability and was a dealbreaker for
me. The publicly shared algorithms, on the other hand, seem like they can
provide a lot of insight, and I will look into those. Thanks!

