So with a few months of research, I’ve been through some of the pain of coming out good strategies be it short term speculative, trend trade, mean reversion, spreads, or just plain time based trading strategies.

These are just some products that are currently on my system:

• US markets Top 10 Volume (so the spreads are 1 cent away, with high volatility/beta though)
• US markets?Top 10 Volatility (must satisfy good spreads)
• Futures markets (Global Index, commodities)
• Correlated US Stocks

Some findings base on my systems:

• Good spreads and volume helped reduce slippages costs, based on Market orders
• Volatility means more trading signals, but does not necessarily means profits
• Futures can be traded like stocks with the same systems, but some trading basics got to be identified and applied.
• eg. Nikkei 225 Futures lacked the “Point” by point spread, instead they are traded with a 5 points per tick, making it hard for Alpha due to the spread.
• On the contrast, the Hang Seng Index futures are great way to trade, because of the tick value.
• Markets are definitely correlated. Systems are up on 20 hours a day, from 8:00am GMT +8 Asian time, to 5:00pm EST US Time.
• By running systems to handle the risk from Hang Seng to Nikkei, and over to Nasdaq and the S&P500 futures, including WTI Crude from Europe to US times, you can see some correlation when one market moves, so is the other, and how the algorithms act upon these information, intra day.
• On the opening bell from 9:30am – 10:00am EST, and on good days (prices are short squeezed onto the Long or Short side), returns can run up to $300-$500, and before 10:00am, it can capture quite a good day’s worth of profits. But so are the risks, when there’s only 10% of the time with such opportunity, and 90% probably losing up to $100-$200. This will be refined and optimized.
• Some of the Algorithm cannot detect what is a random price action and what is an ‘actionable’ trade. So some results are therefore random and something only the system can only manage, but cannot act upon by forecasting or prediction.
• Fortunately, some US Stocks can produce consistent results, even after trading a >5000 shares a day for many many days. o:-)
• For a typical day when all systems are used and all products are added, trades can run up to 500-1000 trades a day, and over a value of USD 2 Million worth of shares traded.
• Adding all up, however the Equity curve are still negative, and points in an inverted 45 degrees, with only about 25-30% of winning ratio and Average/Trade at a negative value

Ahh, some of these stuff are pretty good for record keeping, knowing what works and what not. Thinking back on the days where I had made a few hundreds on an intraday, it spook me to realize how much risk Im actually putting on to produce that kind of returns, that is always inconsistent. Now that the programming of these systems comes at a snap of my fingers, it’s quite easy to “optimize” and fine tune the results.

In my current phase, optimizing the systems for speed and efficiency is a top priority. Tweaking and playing around with the numbers so the magic happens; frequency of signals/trade goes down (reduces brokerage fees) while Profits goes up (cutting useless stuff away).

Also, I have introduce a new strat using pure mean reversion and short trend systems (to counter the mean reverts), and just this system alone is able to produce quite a good run.

So… 3 objectives to meet in 3-6 months time:

1. Trading of more products eg. Futures & Equities, essentially a system able to manage in excess of at least USD 1 Million
2. Average profit per trade > 50 cents, or the Win/Loss ratio > 40% for consistency of at least 100,000 trades over 3 months.
3. Sharpe ratio > 3

Cool, what a post. Next, I’ll be updating my fund performance on my asset allocation base strategies and how they are doing over the past 2 months… (glancing over Municipals Bonds, it was a good bet and a good add to my portfolios since the S&P downgrade in August 2011 =:)

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Having understand some of the simplest investing principles and management, and after playing around with derivatives, I am back to the most simplistic form of trading, as a business.

I wish that I could have started off with this, given my skill sets, but after losing like 30% of my own money down, in exchange for some valuable experience, I think it is worth it. Algo trading, black box trading, or some I would call it low frequency trading (doesn’t involve anything below 1ms) involves the use of computers to make decisions, cut losses, and etc.

And what can I say, there’s a reason why there’s vending machine and why I started vacuuming the floor with “Neato”

Just something I made up hehe:

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Some Technical Analysis Background on BAC:

As of this writing, at this minute, the share price of Bank of America Corporation remains at $13.17

The share prices of Bank of America Corporation (Public, NYSE: BAC) had been dropping since the high of $19.864 on April 15. If you pull up the charts, since the April crisis where the high volatility has started, its shares hasn’t stabilized, until today. The share price has risen slightly today, after 3 days of tight trading range. It has also formed a very nice Christmas Tree since Feb 2010 this year.

Fundamentals:
And if you ask for the reasons, partly was the crisis in April brought in by BP, Earnings Season of Q2 losing out to Q1, and the Euros Crisis. What’s worst was the Q3 Earnings for Bank of America, which was weaker than expected, compared to Q1 and Q2. This casued the price to drop, gaped down, after rallying in speculation.

And now for my analysis, both on TA, FA, and QA on the predicted movements of BAC.

The share price for BAC has dropped quite alot, breaking through the support @ $14 year end 2009. Too many Shorts perhaps, no one wants to take a big part of it. I think it will stay around the range of $12- $14+. As long as the economy and the Fed doesn’t improve and increase the rates, its shares will hardly be moved.

To quantitatively hedge against this drop, I suggest shorting BAC shares to a minimum of $12 (that’s just $1), and Long any Financial Index ETF (Will cover this set of leverage instruments in my upcoming posts) I will suggest a 80% short while 100% Long, so the risk beta is lowered. But that’s just my view, use at your own risk!

Finally, I would stay put, and wait for further information before betting my stake at it.

Disclaimer: I do not own any BAC shares, but I am looking forward to own one.

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Managemoneyonline.com is a website, a blog that I have created to write down my ideas and experience I have encountered. These serve as a track record for me and myself and for everyone else to learn. Trading and investments is a difficult tasks.

I lost quite a few grands, about $9,000 for my first year of noobish trading. That was after the 2008 financial crisis and it was some bull run to 2010, but I still lost. While I am trying to learn “everything”, yes you heard it, everything about trading and investments, I will jot down some of my experiences, and strategies as well.

Well the main key words for this site, manage money, already tells you that I am all about managing money. Afterall, no matter how daring and how much risk profile you want to take, Wall street, or the stocks market is just a random reactions of ups and downs. No repeated patterns no nothing, because if there is, even a 3 year old kid could understand.

With that bad experience, I’ve went deeper and deeper into this art or science. On the second year of my trading, I started building a small portfolio, instead of blindly trading. Reading up and understanding even more detailed into investment banks, financial institutions and hedge funds, I wanted to do what the big guys are doing.

While I go about managing my small little portfolio, hoping to beat the market and growing equity, by measuring my performance with the general market / hedge funds. With strategies such as statistical arbitrage, law of one price, portfolio rebalancing and management, risk management, long/short equities, high income stocks and dividends, and other strategies that I’ve tried, this is the outcome of a true results of a trader who trades his own personal account.

I hope I am able to grow my own funds through this never ending, tiring process of seeking The Truth, the Alpha.

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