Systematic Trading works

[bpr]

very impressive work

 

[lonstud]

I follow a very simple criteria in deciding what information to disclose. Can I reasonably deduce some information about the trading strategy/system from that information?

About the list of scripts I trade, the answer to the above question is yes.

 

[CommoBro]

Do you think commodity gives better returns if, auto traded?

 

[lonstud]

I have not traded commodities in India. In one of my previous jobs, we did trade commodities(viz. gold, silver, crude oil, soy, corn) by algo trading at CBOT and CME, but they were very small percentage of our profits. We found that spreads were too high and there were far too many sudden spikes in prices for them to be profitable in a meaningful way.

 

[CommoBro]

I have not traded commodities in India. In one of my previous jobs, we did trade commodities(viz. gold, silver, crude oil, soy, corn) by algo trading at CBOT and CME, but they were very small percentage of our profits. We found that spreads were too high and there were far too many sudden spikes in prices for them to be profitable in a meaningful way.

SO, was it a arbitrage kind of algo strategy you used on commodity futures?

 

[lonstud]

You can call it statistical arbitrage, as is any algo trading strategy. Pure arbitrage is dead anyways.

 

[ndtrader]

From what I understand fully automated algo trading is not allowed in India. It seems like prior approval of strategies from the exchange, and plethora of other paperwork is needed before fully auto trading a strategy. Is that the route you took?

 

[lonstud]

I'll not disclose the trading frequency.

Unless I have made a wrong disclosure, I have never said my strategy is fully automated. So I have not taken all those approvals which are required in India for having fully automated strategy.

 

[ndtrader]

Unless I have made a wrong disclosure, I have never said my strategy is fully automated. So I have not taken all those approvals which are required in India for having fully automated strategy.

If your strategy is not fully automated as you say, is there a discretionary component to it and/or do you place discretionary trades? And also then, what justifies the high brokerage and feed charges that you incur, which if my Math is right, would be not too far away from your starting NAV per annum? Is there anything in particular this broker provides you that you think trumps the costs savings that a deep discount broker combined with an external data feed would provide? A dark pool, maybe ?

Thanks for patiently answering all our queries.

 

[lonstud]

There is no discretionary component to the strategy. When a buy/sell is generated, it is executed. To rephrase my last statement, I cannot confirm or deny if my strategy is fully automated . Feel free to make assumptions about that aspect.

As far as brokerage and feed charges are concerned, there are no feed charges with my broker and brokerage charges are comparable to discount brokers. My broker charges me 0.01% on only one side of trade, if I close my position the same day. So, for a futures contract having notional value of Rs. 5 Lakhs(most are in the range of Rs. 3-4lakhs, though this will change from next expiry), I am paying Rs. 50 for two trades, which will cost me Rs. 40 on zerodha and Rs. 36 on Composite Edge. On these two discount brokerages, you'll have to add cost of external data feed providers along with fixed charges for enabling algo trading feature. So from the cost perspective, there is not much savings.

Also, having more players involved, such as external data feed providers and then using the signals for trading on discounted brokers, increases the risk of going something wrong. With my existing broker, everything is handled in a single platform. Then there is also the factor of robustness. Only one day in the past 15 months, my existing broker had problems with data feed and order execution. As I gather from this forum, these problems are more frequent with other brokers and data vendors.