REFCO…YOU REMEMBER THEM  DON’T YOU ?

This book was originally published by a little outfit known as RefCo. My copy of this book is originally from the Refco Private Clients Group.

Refco was a pretty messed up company. They were the largest futures broker in Chicago in 2005. It went public in August 2005, had a crisis in October and filed for Chapter 11 a few months later.

Stock went from $28 to $0.80 when it was learned the CEO was playing Enron type tricks with the accounting. The CEO  Phillip R. Bennett  earned 16 years in jail for this stunt.

AND NOW FOR THE BOOK

Anyway, back to the book. It read a little like an advertisement for RefCo which makes sense because they wrote it for their clients. It is now published by Wiley press, since their downfall.

Some of the other chapters cover things such as what are 1256 contracts ( They are a tax break for US futures traders). What regulatory organizations exist and what are their roles, such as the CFTC. Other chapters cover things like the different types of orders and the different players in the market.

Take chapter 5, “Using an Auto-Executing Trading System” for example, gives an overview of what you need to look for in an auto execution system. Not how to build one. My guess is that they would try to sell you a system if they could.

BOTTOM LINE

Nice read for a beginner to intermediate trader if you can get it from the library or borrow it. Unlike some books, you won’t get anything out of it by reading it a second time. It is a complete , but slightly outdated reference. It tells you everything about futures trading except how to actually trade futures.

I give it a C+, not crappy, but not a book I would want to give up shelf space to have in my office. It is a cheap book, you can pick it up for about $10 bucks.

* REFCO Private Client Group, formerly known as Lind-Waldock, founded in 1965. Lind-Waldock was acquired by Refco Group Ltd. in 2000 and became a division of Refco, LLC, in 2001. In 2005, the firm changed its name to Refco Private Client Group. Then the whole thing went bellow up.

VIRUSES SUCK

Damn computer viruses. You have to keep your trading system virus free, it is a matter of dollars and dollars.

A virus infected systems, quite frankly sucks. These viruses are written by kids /gangsters/spammers or other miscreants. They spend a lot of time to get your computer infected for a lot of reasons. Sometimes they infect your computer for fun, to spend spam, harass companies or any number of other reasons that are not very nice.

Think about this , do you want your trading account at the mercy of some 14 year old virus writer who wants to send spam on your computer ? I think not.

NEW THREAT USB DRIVES

I must admit, the computer that runs my NinjaTrader strategies was infected a couple of months ago. I was shocked because I only run NinjaTrader on that machine. It was a particularly nasty virus that was crashing my machine soon after startup.

A computer virus is a computer program that can copy itself and infect a computer without the permission or knowledge of the owner. A true virus can only spread from one computer to another for instance because a user sent it over a network or the Internet, or carried it on a removable medium such as a floppy disk, CD, DVD, or USB drive. Viruses can increase their chances of spreading to other computers by infecting files on a network file system or a file system that is accessed by another computer.
From Wikipedia

    So I cleaned the virus with the help of a Linux machine, and set out to  find the source of the infection. I scanned all my Windows machines. I have a mixed network so other operating systems might store a virus on a network drive while these computers would not be infected themselves. So I scanned my network drives and still nothing.

    Finally , I started scanning my USB drives I had laying around an there it was. The same virus that had infected my machine. I had let my 9 year old nephew copy some mp3 files with that USB flash drive. Great.

CLAMWIN

ClamWin is a free virus detection program. You should not have viruses to begin with, but that is beside the point I am trying to make here. Sometimes these things happen when you least expect it. At my former firm, we ran virus checks on our machines every weekend.  Every weekend, I run still run ClamWin on my trading and development computers to check for viruses.

Clamwin is based on the open source GPL program ClamAV, which can scan for viruses on Linux and Mac operation systems. The virus definition update files are also free. Open source guys rock.

VIRUSES CAN COST YOU MONEY

Some people complain about the performance of NinjaTrader. I wonder how many of those peple have infected computers, and blame the ’slow’ computer.

NinjaTrader will use lots of memory, and viruses can cause a computer to run slowly or freeze during trading. Trust me on this one, you do not  want NinjaTrader to freeze while you’re in a trade.

Your trading computer should just be for the development and trading of systems. Do not let your 9 year old nephew download random software to your trading computer ( or copy mp3 files ).

So run ClamWin every week and keep your trading computer virus free.

FULL DISCLOSURE : (1) I have no connection with ClamWin except as a user (2) Open Source guy are great to have around (3) Did I mention it was free?

R.I.P. OpenTick

OpenTick was a inexpensive  financial data supplier. They had been around for about 5 years, and had an API you could use in your software  to access their data. They had a lot of historical data for free and the data that was not free was very inexpensive.

API means Application Programming Interface. It is how computer programs connect to services such as OpenTick or ZenFire.

On 3/16/2009 , OpenTick posted a farewell message on their website. I had used them for a few years, although lately they began to suck. They did have a lot of historical equity option data at the time which is something I needed back then.

I had not noticed because my login was still working ( for the API, not the site ).  They were a great place for free data, but that is not nearly as important as they were five years ago. Still, I had written a client application using them as a backend, which I now have to re-write for IB (Interactive Brokers ). It is not a problem, just a pain on short notice.

OUT IN THE COLD ON MONDAY

They are were my backup service.  As of Friday, any non paying subscribers will be cut off, and paying subscriber have another week to move their apps. You cannot even log into your account anymore even if you are a paying customer by the way.  So if you have any software written to their API, I think you better look to moving to a different API.

When I am running ZenFire during the day and I need to develop on another server, I often used OpenTick for my data source.

XASAX

Their parent company is XASAX or something like that. I really wonder what there people were thinking when they name a company something like that.  Strange names are o.k., but names like this require a pronunciation guide.

I had a sales call with them when I was at my last company. I for some reason, they could not call before or after the market was open, and wanted to talk near the open. When most people are busy. It is not like they are selling shutters or something. Seems strange that a company that wants to serve people who work in the financial industry, but can’t accommodate them time wise.  I think 4 pm EST is perfectly reasonable, they however did not.

I moved my schedule around, and then they stood me up. We rescheduled, but by this time, they were already on my $hit list. We talked, and the sales guy could not give me a reason why my company  should pay 6K a month for his product. Maybe there was something I was missing, but just doing colo for 6K a month seems strange.

I think five or six years ago, their product may have been great, but that was so 2003. The world has changed a lot since then. There are so many places that give low latency feeds and so many people in that space, I do not see the benefit.

And he could not tell me the benefits either. He promised to find more information and follow up, but I never heard from him again. Good riddance,  if a salesman cannot tell you why they have a good product, why you shuould use them or at least follow up, then maybe they should not be selling a $6K a month  product.

CONCLUSION

It was pretty weak to give people two weeks notice that their service for paying customers was going to be discontinued.  They say they are coming back, but who is going to write to their API now knowing they are flaky and could discontinue your service with a two week notice.  Would I want to base my next piece of software on their API’s?  No, of course not.  How does anyone know they will not just do another Houdini and disappear in another few years.

I will stick with IB & ZenFire for now.

Photo Curtesy Of Whipped Bakeshop

To opentick subscribers, friends, supporters, contributors and the rest of the community…

It has been quite a journey for opentick, and for those of you who have been with us for the ride we cannot thank you enough for the support, contributions and guidance you have given us over the course of the last 5 years. We could not have come as far as we have without you.

However, we are sad to say that the time has come for us to close the doors for opentick. However, this isn’t goodbye. In fact, it’s a new beginning. We will be introducing a fresh service with all the bells and whistles we’ve been slaving on over the course of the last year under a new name, a new website and a new level of service. Check back here in the near future for more information about the forthcoming new company and service. Of course amongst all these changes, there are some things that will remain the same – we still aim to provide a reliable free market data service, with an open architecture for a wide range of software platform support.

If you are a current paying subscriber, this March billing cycle will be your final billing cycle; at your next billing date service will be terminated. If you are a delayed or historical data user not currently paying for service, your account will be deactivated as of Friday, March 20th.

Sincerely,
opentick Staff

One day, we shall come back. Yes, we shall come back. Until then, there must be no regrets, no tears, no anxieties. Just go forward in all your beliefs, and prove to us we are not mistaken in ours.

TRADESTATION VOLATILITY

When you convert an automated trading strategy from one system to another, there are a lot of things that will be  ’missing’. Such as a trading strategy from Tradestaion to NinjaTrader, you may not have some of the built in indicators that you had with the previous platform.

I have converted trading strategies from different platforms to NinjaTrader and ran into this problem. I ended  up creating NinjaTrader versions of a bunch of Tradestation indicators. Case in point,  this one is called Volatility in TradeStation.

Tradestation volatility is an indicator that measures the current volatility of the market. There are other measures of volatility , such as standard deviation.  It is different from things like standard deviation, in that it uses the high , low and close of a bar to calculate the volatility and not just the closing price like a standard deviation based indicator does.

You can click on the image to see a  huge image from Tradestation and compare it with the same indicator from the same timeframe on the image below.

TRADESTATION VOLATILITY INDICATOR FOR NINJATRADER

Note, that this is is a clone of the TradeStation indicator.  I got it as close as possible . This version of of the Volatility indicator matches the current TS version.

The original version in Tradestation, from the book ( See Reference Below ),  is now called VolatilityClassic. Like Coke Classic I guess.  I do think the current version is better than the original, in my humble opinion.

As you can see from the two images, they are very, very, similar.  No matter what you do, there will be small differences whenever you take an indicator from one platform to another. Such is life.

HOW TO USE THE INDICATOR

Volatility can be used in a couple of ways, the easiest would be the setting of stops. The more volatile the market, the further away you want your stops. Of course, this increases the risk. Another way is discretionary trading. Volatility sometimes reaches an extreme near the end of a move. A discretionary trader could use that to exit a trade.

DOWNLOAD NINJA TRADER VOLATILITY INDICATOR

I have put a banner ad up on the site for you to download this indicator when you sign up for the mailing list.  I do not send much on the mailing list, but I put any updates to my free indicators there so it is a good thing to be receiving when I update indicators.

If  the offer has expired, is because the free download has been cancelled, changed, folded , spindled or mutilated ( Just kidding ) .  I do rotate the free indicators, so if the offer is gone, AND you are on the mailing list, email me and I will see about getting you a copy.

Reference
Kaufman, P.J. The New Commodity Trading Systems and Methods.
John Wiley & Sons. New York 1980. Pages 99-101

FREE INDICATOR OF THE MONTH

I have decided to release some of the indicators for NinjaTrader I have written when translating Easy Language strategies to Ninja Trader. So I will post them for download for a month, or until I replace it with another indicator. So I guess technically , it should be “Free Indicator Of The Moderately Indeteminate Time Frame With A Median Time Of One Month”. While technically correct, that would be too long for the title of a post. As well as boring.

TRADESTATION

A lot of people are moving from TradeStation to NinjaTrader. There could be a lot of people moving the other way, but I would have no idea, since they would not be contacting me.

I try to avoid writing EL ( Easy language ) code anyway, I prefer C# to EL. That is just me, I know a lot of people who love TradeStation. Now if I could just get an application that was written in C++ on Linux…….

COMING UP

I am releasing the TS Volatility Indicator (a Tradestation indicator converter to NinjaTrader ) first. I will release the VolumeRatio ( also a Tradestation indicator converter to NinjaTrader ) and my Opening Range indicator in the next few weeks. So get on the list and get them mail to you when they are released.

Photo Courtesy kalandrakas

WAITING FOR NT 7
If you knew me, you would know I am a big ACD fan. We had a bunch of ACD indicators written for Ninja Trader, but had not released them. ( We released two as stand alone then pulled them back ). When we were looking at releasing them, NinjaTrader 7 was going to be shipped ’shortly’. We did release Pivot Moving Average, Sushi Roll and Opening Range indicators.

We wanted to wait for Ninja Trader 7 which was supposed to be released at the end of 2008, but has been pushed back. I am sure this is NOT a waiting for Godot type of delay, Ninja Trader 7 will be released, but this is the way software developemnt goes sometimes. Unless you are Microsoft, then it is the standard. So we are going to start releasing all of the ACD indicators we have for Ninja Trader over the next few weeks for Ninja Trader 6.5. Hopefully, there will not be a lot of changes between NinjaTrader 6.5 and NinjaTrader 7.0.

THE LOGICAL TRADER
For those of you who don’t know, ACD is the method outlined in the bok, ‘The Logical Trader’, by Marc Fisher. I don’t think anyone uses ‘pure’ ACD anymore, but there is a lot of good stuff to take away from the book.

GODOT
NinjaTrader 7 AS OF THIS POST is supposedly scheduled for a second quarter 09 beta. ‘Nuff said. For those of you who do not like plays, Waiting for Godot is a play by Samuel Beckett, in which two characters wait for someone named Godot. Godot never shows up.

The photo has nothing to do with ACD, NinjaTrader, or Godot. I just like auto show girls. You can click on the image to make it bigger.

If you are thinking about using IB ( Interactive Brokers ) for trading your futures trading there are a few things to know so you won’t get screwed hurt.

If you are position trading or cross margining, these problems probably won’t make you lose to much sleep.

Don’t get me wrong, I think IB has some great features. You can trade anything , futures, options, and stocks in the same account. It is a good step up from the pure retail firms like ScottTrade, etc.

So here are the four things you need to know if you are serious about trading futures with IB.

Number 1 IB does not send every trade. What you are seeing is a ‘combined’ feed. Three times a second it bundles up the trades and sends the summary to you. This saves them a lot of bandwith but it costs you accuracy. That sucks. If you are a manual trader, sure , you would probably never notice but computers do notice.

Number 2 Backfill. This is soooo bad you would not believe. Imagine you train and back test your system over historical data. IB sends ‘corrections’  in the live  datafeed up to 30 seconds later. So a price you see for a trade , may disappear 29 seconds later. Horror.

Number 3 Margin for day traders is high. If you are doing short term auto trading, you can control your risk. I don’t think you should be trading with $400 Emini margin ( also crazy ), but I think the margin that IB charges goes to the other end of the scale. They were charging $6K per E mini contract a few months back, which is insane if you are a high frequency trader.

REALLY SHORT REVIEW : GOOD BOOK FOR THE QUANT RETAIL TRADER

LONG REVIEW
I read a lot of books ( when I have the time ) and I came across this one and I was pleasantly surprised. I didn’t pick up THAT much from the book, but it is well worth the read. It codified a lot of thoughts I have had over time and that is always a good feeling.

GOOD POINTS

It is not as ‘formally’ written as a lot of trading books. It reads more like a conversation with someone who has been trading for a while. If you are a ‘advanced’ retail quant trader , then this is a book for you. Gives you insight how the home quant traders can beat hedge funds in investment performance. The author has worked at hedge funds and quant shops so he knows what he is talking about.

BAD POINTS

So now that I have given you the good parts,  the bad parts about the book  is that ‘lightweight’ if you are a heavy in quant type trading ( like a large fund ) and it is a bit short at 160 odd pages. Then again, if you are using NinjaTrader you are probably more in the ‘non-billion-dollar-hedge-fund’ area of trading like me.

CONCLUSION

If you plan on using Ninja Trader to auto execute a strategy, I would recommend this book. If you are just interested in learning about quant trading for the single investor, I would really, really recommend this book.

The author has a blog so you can check that out also.