Ok, It's freaking late and I am tired, but I just wanted to vent for a bit and explain what the hell is going on. So anyone who has been following this blog knows by now that I have not put a single dime of my real money into the Robotic portfolio yet, it's all been simulated trading and months now of trying to get a hold of some sense of reliability here... I am a very detail oriented person, and from the very beginning things have not felt entirely right about this whole thing. From the way Scott communicated with me, to how long it took him to send me any info, which was just a slice of what I asked for, to the fact that half the info he sent me was totally bogus because he recorded it with errors on his chart settings, along how long it took us to figure out that was the problem (and him continually assuring me certain concerns I had were of no real concern), to TradeStation being an unstable shiny turd and not taking trades it should have taken, to them shutting down their Forex business, to getting the new MT4 robots that are missing key settings that the other robots actually utilized (Even though Scott has told me they do not utilize them).... Well, since I couldn't freaking sleep again tonight I decided to take a closer look at the differences between the MT4 robot and the TradeStation robot. The MT4 robots haven't taken a single trade in over 24 hours, which is unusual for a portfolio of 12 robots I thought. So I opened up TradeStation to check and see if it had shown any trades for the portfolio as well. Thankfully there were no trades on that platform either, but I did get to thinking and checked some things out. I backtested the USD/CHF pair in MT4, and it was profitable in the last year. I looked at the same pair in TradeStation, with the same settings and it had horribly lost money.
What the hell would cause that? Remember the post a little while back about how crazy the spreads are on some of these pairs? Well, that's always been a concern in the back of my mind: If these robots are taking as little as 5 pips profit, (And one of them did) it's very important that the testing include accurate slippage on each trade. Well, I did some research on TradeStation settings and ran across two very important details that have changed things for me drastically. I found out that not only does TradeStation simulate some trades that will never take place in real life, (Which I'll explain in a moment) I also found out for certain that the only way to account for the spread is to enter the spread in the "Slippage" setting in the properties for the backtest. I'd like to address the latter aspect first: the spread. Early on, I asked Scott about the spread being accurately represented in the TradeStation settings and the data in his spreadsheet. He has told me and others online continuously "I include enough slippage into the robot so that I actually do better in real life". The bad news is that according to the live, real-time spreads shown on the actual MT4 platform in comparison to what is set in TradeStation, he is using half of the actual spread, and sometimes even less, which greatly effects the performance results as I will show you below. The first point I mentioned, is that TradeStation will take a trade in the Strategy side of things at times, and will never actually execute it in real life and visa versa. Why? Because of how TradeStation tests. Listen Carefully and I'll try to make this as simple as I can. MetaTrader tests with the spread included in the simulated price, therefore, if you set it for a 2 pip spread on the EUR/USD currency pair the buy price is 2 pips away from the sell price. 2 pips would be a price increment of 0.00020 just to be clear. In reality the price would look something like this: Buy price: 1.11629 (also known as the ask, what sellers are asking for) Sell price: 1.11609 (also known as the bid, what buyers are asking for) However, TradeStation uses only the Sell price for both buying and selling in the strategy! Buy price: 1.11609 Sell price: 1.11609 Why does that matter? I'll explain very clearly why. Lets Say the market is dropping from 1.11720 and you have a buy order at 1.11609 because you think price will bottom out and turn around there. Because TradeStation backtesting only uses the Sell price to enter, if the sell price hits 1.11609 and price turns without going any lower, the strategy would think you took the trade, but in the real world you can't buy at the sell price. Because of the 2 pip spread, the real price you could buy at would be 1.11629 and that would mean you never actually took the trade. Let's reverse the logic and say price was rising from 1.11520 up to a buy order you had at 1.11629. Lets say the sell price came up as far as 1.11609 and turned around. In real life, because of the 2 pip spread the buy price would have hit your entry at 1.11629 and your trade would have been triggered, when the strategy tester would have never entered the trade at all. In both of these examples you can see a huge potential problem. In a currency where the spread is usually 1.5 pips, it may not be as likely that you will run into this problem. However, when the spread is 4 or 5 pips on a pair, this can happen even more depending on the volatility of the currency... It is a wider margin of error theoretically. This is a gigantic problem in my eyes and erodes the confidence needed to believe in this trading system based on TradeStation's method of testing. I personally can't trust data that accounts for trades that would have never taken place or trades that would have happened in real life, that never show up in testing. Given the volatility of the market, I do think those occurrences would be somewhat rare, But who can really tell? It may seem like no big deal, but who knows how many trades out of the thousands tested in TradeStation were BIG winners that would have never happened in real life thanks to a few measly pips not accounted for? And who can say there aren't missed losers for the same reason? You'd have to manually go back through the entire chart history and look at each trade to see if price turned around immediately. That would be exhaustive and even then, the robots are not the same for MT4 anyways. They are missing some trade settings. AND YES, THE ROBOTS ARE MISSING SETTINGS THAT THE TRADESTATION ROBOTS USED: An RSI exit that closes the position when overbought or oversold is reached. Here is just one example with the AUD/JPY.
You'll have to click on the image to see it clearly. I know it says "Same settings" but what I mean is "All the same settings besides the missing RSI exit". So not only does TradeStation both potentially miss and add trades it shouldn't, it includes the slippage after the fact, which exacerbates the problem. Think of it like a ship in the sea. A small change in the sail at the beginning can produce a drastically different arrival point down the road. I imagine that may be what is happening here... The original TradeStation robot did so-so for 4 years and 9 months at 29%... But the MT4 versions adjusted version came in a half that amount! 15% gain in nearly 5 years is horrible! That alone is a thorn in my mind, but given the other large problem being the fact that the spread was improperly input into the slippage... Once more accurately represented, it drastically alters the end result. At this point, the only reliable testing out of the two for me, is MetaTrader, and those results have become unappealing with the more accurate spreads in the testing. Perhaps a trend following portfolio, where the spread is of little consequence, is the way to go?
Woke up this morning to an email from TradeStation that very vaguely said they were transferring all accounts of over to Oanda and you would now have to use their Shitty, non-automated platform instead, but you could still use the TradeStation platform for FREE (OH YAYYYY!!!) Forever on SIM... Who cares! So, to find out exactly what that meant I decided to get a hold of their live chat people... Turns out for whatever reason, come March 1st TradeStation will no longer be servicing Forex accounts PERIOD. Oanda is taking over the roughly 2000 accounts, which is way less than I thought they would have. I've emailed the creator of the robots to find out what his solution is and he says he's got the robots already made for MetaTrader 4 and he is testing them to find out if they are exactly the same now... After having taken as long as I have to get used to TradeStation, I really love it. It just feels like a well crafted machine with lots of useful bells and whistles... At least with TradeStation I know I have the option of getting email alerts and having it actually work.... This has been a ridiculously long and frustrating experience... From taking months to actually get the details to these robots, to actually purchasing them, to getting them running correctly (Thanks to an error made by the seller), to testing them on sim and realizing there are problems... to finally being ready to put a real $20,000 account to use.... and finding out that literally the month I want to go live with them, the platform they are created for won't be usable anymore... Here is Scott's video update. Good news either way.
Finally have the bike fixed up. I took some time today to polish the head light, clean the exhaust pipe and repaint some things that needed painted. On top of that, while I was fixing the bike out in a parking spot in front of the apartment, out of nowhere a red pickup truck with an older bearded guy pulled up and handed me a business card and told me "If you ever need any work done I work on sport bikes." I thought to myself "What the hell is this guy doing here??" Well, turns out he lives in this complex and was told he can no longer work on his bike on the complex property because he leaves a mess... My maintenance guy came running up telling me that this guy video taped me working on the bike and sent it in to the office. What an asshole. I always clean up after myself, and this lazy person who doesn't has to ruin it for me. Either way, if I want to wash my bike, I'm gonna do it. If I need work done on my bike, I'm going to do it...
As far as the trading goes, I have started running the portfolio on my high performance rig at the same time and have noticed that my older computer has internet problems that my rig doesn't have. I will probably be switching over to just this rig for trading the portfolio. Possibly spending some money to have a newer dedicated rig just for the trading portfolio... but we'll see. After expenses and everything in the last 7 months, I've got about $21,000 total to trade with. Spending on dental crap and all that necessities I have turned out to be more expensive than I wanted. There is a truck wash in town that is hiring between $12.50-$15.00/hr. That would easily enable me to put consistent capital into the business. That's all for now.
On January 1st I started my 10 robot portfolio and ran it until midnight the 31st. I started with no experience on the Tradestation platform and came across a few hiccups during my month of learning, which cost my simulated account a substantial negative impact. I started with $10,000 and ended the month down $242.33 to finish at $9757.67 Now, that's only a 2.4% loss for the month, which is't bad at all really, but when compared to the results that it should have been, the discrepancy is a little unsettling.
If you look at the far right totals for both the real and reported month end, you'll see that the strategy that was actually running produced a profit of $42.69 while the backtest result (performed at the end of the month) reported a $36.92 loss. How did the actual performance have me losing $242.33 when the live running strategy actually reported a $42.69 gain? Let me introduce you to TradeStation's quirks. For whatever reason (perhaps the performance capabilities of the computer I'm running things on, mixed with internet instability) at one point the strategy was giving trade signals that the platform was not executing... So that generates trades on the chart that never happen in real life. There were also problems that kept the strategy from generating trades that it should have as well. Those are the two reasons for the discrepancies. One quirk I have noticed on my dedicated desktop is that when I load up TradeStation portfolio, there are almost always problems with the strategies initializing. I will have indicators not load on the chart, so I will have to disable and re-enable them before the platform recognizes the Robot. This problem has not cropped up on my more powerful desktop in the office, but I use that for many other things (Such as testing) and don't want to run the portfolio on that machine.
I do have a handy method in place for helping me keep track of the platforms performance. I have text messages setup to tell me when the strategy fills an order, and I know to expect another text immediately that says TradeStation filled the order as well. If I don't get that text, something is wrong and I need to go check the platform. Anyways, my present conclusion is that the robots do perform as described and advertised in execution terms, give or take a few dollars here and there. I will more than likely be running these robots on a small live account soon with 10 times smaller positions just to see if live money execution is drastically different than simulated positions. In the mean time, I have also decided to optimize these robots in accordance to the previous 5 years of market conditions. These robots were developed from roughly 2003 to 2007 to perform in this time period. I'd like to optimize them for the last 5 years and see how they do in earlier years. I can understand ones apprehension to fiddle with something that works, but I think a lot of that has to do with a lack of confidence or ability in ones own mind. These robots do very simple things: They use Moving averages to determine trend, and then use Relative Strength of the current market to identify a good time to enter and sometimes exit. There are many useful variables in the programming to take advantage of, but my point is they arrived at their current profitability through the same work I am going to be doing to modernize them for the current time period: Hours and hours of testing and paying close attention to the response of inputs tested. So far I have about 4 of the robots producing more profit with the same or less drawdown. It's something I will continue to work on for a very long time and perhaps as long as I am a robotic trader. I love data, and this beats manual testing any day. As far as my non-trading life goes, I am now rocking a pink cast which will be removed in 6 weeks, No surgery required thankfully. My new tail section is arriving on the 10th and I'm dying to get back on the bike. I'll have to rig my cast up somehow to make sure it will not slip off the right peg. My new left side peg is here and ready to be installed. I'm going to the cinema-pub for valentines day to watch Zoolander 2! I will be back in the gym rocking it very very soon! Turns out the bus isn't so bad at all :)
Made it back yesterday afternoon. I didn't take my good camera on this trip because I didn't want to deal with carrying it around everywhere, but I wish I had taken it. Chicago was pretty awesome. Frankenmuth (Michigan) was pretty nice as well, and I just would have taken some grand pictures as usual. Remember how I said the number 7 seems to like me? Well, I was in row 7 again on the flight home, and during a White Elephant ornament exchange my number was 7 as well. I laughed pretty hard when I unraveled the folded up scrap to see that number! By the way I got a purple stiletto ornament, which is fine by me!
On the flight home I watched a documentary called Billions In Change. I had downloaded it from YouTube months ago and was glad to finally watch it! Another great one, no depressing stuff at all so I highly recommend it!
Anyways, I have some news to announce. After months of effort and researching and emailing, I finally got a portfolio of robots. I have a funded TradeStation account to run them on as well. The offer being made is 5-9 robots for $3,000... So when I was emailed one file of code which had only one file to attach to a chart, I was a bit confused and feeling a little aggravated. Turns out the code is actually just one robot that has tweakable variables. You attach that same robot to every chart and tweak it into profitability. What you are really paying for is one robot and the hundreds (Reportedly) of hours Scott has spent tweaking these setting per each individual currency pair so you don't have to do it yourself. The good news out of all of this is, is that if you have the one File (Robot) you can attach it to any chart you want and tweak away until you discover a way to make it profitable at no further cost! That is something I may do in the future, but for now I have other problems. So, let me explain TradeStation to you a bit. It's a relatively sophisticated trading platform designed to robotic trading, but also has in depth features outside of that as well. It is very complex and I think I will be trying to get used to it for awhile. The good news so far, is that my dedicated computer that is already running 3 instances of MetaTrader 4 can also run TradeStation with the 10 robots as well. It has no problem so far. My main issue is that with all the the charts set up and trading, there seems to be a problem I can't figure out yet. The Strategy is taking analyzing the markets and all that correctly, but it's not actually executing trades in the simulated account for some reason. I'll need to fix that for sure. One other problem, or issue I'll need to address, is that my backtesting results aren't lining up with the results I was given. Naturally the thought arises that I got scammed somehow, but I haven't been convinced of that just yet. I think there may be some setting that got lost along the way... Either way, to keep this short I'll say this: My goal is to get everything running smoothly and lining up with the info I was given, and then run the portfolio on the simulated account for at least a month or more, and see profitability. Then, I will go live with small position sizes to see if live trades execute in a manner that lines up with the simulated account. I will keep you posted on all of that as it happens, but I plan to be pretty busy with it and may not be posting about anything else for awhile. We'll see.
