Hello, I am alive It’s been a while since I posted and a lot has happened.
My daughter was born two days after my last post – many sleepless nights since then!
My client work has become extremely busy. Projected to slow down through October and hopefully beyond. I’ve had enough of my client work. It’s easy money but time for money is the worst trade going. I’m going to take a solid break over December through New Year and then reduce my hours available for clients next year.
The trading bug is here to stay and I need to work this thing out. I am definitely making progress. No doubt about that. Here’s what’s happening my end with regards to trading.
Bund was really slow over May/June/Later? Got tired of wasting hours while it ranged 20 ticks. Became discouraged and felt that I needed a different style of trade better suited to my circumstances.
Have decided to split my finances in to three allotments. 1 – long term, 2 – short term discretionary, 3 – short term mechanical.
Long term is more traditional investment objectives. I realised that I’m always in a trade, whether I like it or not. Like most people, I get paid in a local currency, AUD, and then hold savings in a bank in that currency. The last few years this has been fine, AUD has been very strong on the back of China growth and global yield seekers. That story has begun to shift and AUD is not looking as solid as it once did. Therefore, I need to make conscious decisions about my savings. Hence the need for a long term account.
Short term discretionary account is where I play with ideas, and watch the market. The hours I spent watching the DOM were incredibly instructive and I believe has put me well ahead of the typical retail trader. To the point where I find it frustrating to talk to retail traders as most don’t understand the basics of the market auction mechanics. Anyway, the short term discretionary account is designed primarily to watch the market with trades in mind, and hopefully learn trades to a point where I can turn them in to mechanical systems.
Short term mechanical is where I build code to trade for me. At the very least I hope to have a system that screens markets and identifies markets in play to avoid the problem that I had watching the Bund for weeks doing nothing. At best, I hope to have a fully mechanical system. I’m going to start with the work from Ernie Chan’s books, and possibly Mark Fisher’s ACD system. I believe that I have a good understanding of the auction process and so hope to also build systems around the process such as fade consolidation ranges.
To be honest, I’m a little conflicted. I like the style of the SMB prop traders from the book One Good Trade. They screen the market for stocks in play, and then discretionary trade them based on trades they have seen work in the past. This seems attainable given my circumstances. The alternative is mechanical trading which falls to my strength as a professional software developer, but seems to have a less certain outcome. I’ll probably pass on the mechanical stuff for the time being and see how the discretionary trading goes outright, as it’s something I can test fairly immediately.
Besides internal conflicts, I’ve also had issues simply getting the trading business up and running. Some of the biggest troubles I’ve had have been to procure data, organise a broker, select markets to trade, etc. All that stuff that is necessary to the business of trading but so elementary that it feels like it’s not really progress once solved. Unfortunately trading from Australia with a family presents many logistical challenges. The european market opens at 2pm/3pm, US market opens about 10pm. Way too late for me. Asian markets seems like the only discretionary market available for me. On top of that, I feel like I need to cast a wide net irrespective of the bucket shops, flakey data feeds, and half baked trading software that I may snag.
After much pain and Googling, I’ve decided to trade the Australian Stock Market (ASX) . My previous concern around equities has been the required capital, data/software availability, and commission costs. I’ve decided to use Turbo Trader for the data, and IG for CFD brokerage. The benefit of going through IG is generous margin to remove capital requirement concerns, and the ease of going long/short. They also have a really simple but useful REST API. Turbo Trader provide access to a JSON web API (aww yeah!) which is not documented on the site. I only found it by accident after emailing to ask about DDE/RTD access. Commission costs are OK, not as good as futures which means I won’t be scalping, but acceptable at about the cost of one tick round turn – or five times as expensive as trading the Bund.
A couple of notes of caution. I was about to sign up for PhoenixAI but their sign up form failed. Then I emailed support about the failure and didn’t receive a response. PhoenixAI has some neat features with DDE/RTD support, but in the end they didn’t seem too professional. An honorary mention goes to the Spark platform from Iguana2. I trialled Spark and it’s pretty nice. They definitely have a focus on day trading ASX/NZX. They also support DDE but come in at twice the cost of Turbo Trader and their web API is considerably more expensive. I think Iguana2 has a superior product, but it’s not the best fit for me right now. For the sake of being complete, I also came across the following platforms with live data and seemingly acceptable UI: BourseData, CMC, Commsec Iress.
With my trading plan, there’s three key elements – screener to find stocks in play, the DOM ladder, and an execution module to manage trades placed on the DOM ladder through to IG. So the plan is to initially use the Turbo Trader UI for the screener component, and build a DOM ladder interface using the Turbo Trader web API for the Depth & Sales, Time & Sales component. I’ll connect the DOM to the IG trade API calls.
I’m excited by this new direction, and looking forward to plunging head first shortly.