My son recently had his first birthday and amazes me daily with his new feats as he runs around increasingly stably exploring the world around him. It occurs to me that the system I use to trade every day, Stratbox, is approaching its fourth “birthday” in the next few months. I hadn’t originally intended to write a system – an algorithmic trading platform – but found that existing products were limited, expensive and didn’t fit my mental model of what they should do.
This isn’t surprising as I wanted the system to support all of the activities associated with our algorithmic trading. It turns out that that’s a lot to ask of a system. It also turns out that you learn as you go and so the system continues to evolve. A few years ago I’d posted about the basics of a strategy container and in this post I’m going to come back to this topic and describe some of the layers of code and thought developed since then.
First, let’s consider the role of a strategy container. Its job is to intermediate between trading strategies and the external environments with which they interact. It must also provide services that strategies can use (e.g., position management) and that it wouldn’t make sense for each strategy to re-implement. In the past I’ve focused on the former responsibility of adapting strategies to external environments. Why is this necessary and interesting? Because it allows us to take the same exact strategy and run it live, or in simulation or in backtest, etc. Interesting and necessary, but not what I want to focus on this time. Instead, I want to look at the services provided to strategies; the ‘ecosystem’ a strategy container provides in the hope that strategies might flourish within it.
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EMS Internals, FIX Protocol, portfolio management, strategy development, technology
There’s been a lot of attention focused on trading battlebots recently. It’s important to keep in mind that this is part of a long-standing, broad and arguably inexorable trend that is now spreading rapidly away from its successful base in industrial manufacturing to every other conceivable field from scheduling and logistics, to CAD and on to more aggressive pursuits like trading and battlefield operations. Perhaps looking at the state of the art in related fields can inform us about the direction of our algo bots.
This article in Foreign Policy illustrates an area where automation is making great strides into historically human undertakings. The use of so-called drone aircraft for recon and tactical missile strikes has reached a remarkable milestone: this year, the US Air Force will train more “pilots” for unmanned aircraft than for real fighters or bombers. Evidently there’s good reason for this change:
By 2013, software and communications improvements will allow the Air Force’s unmanned-aircraft pilots to simultaneously fly three drones at one time, and four in an emergency. Another factor supporting the likely proliferation of drones such as the Predator, Reaper, and Global Hawk is their low cost compared with new manned aircraft such as the F-35 Joint Strike Fighter.
According to the Government Accountability Office, $24.5 million will purchase a set of four MQ-9 Reaper hunter-killer drones plus a ground station and satellite relay. (See page 117 of this report.) The latest guess of the price for a single F-35 fighter-bomber is $100 million. (See page 93.) This gap in cost led Defense Secretary Robert Gates to demand the cancellation of the manned F-22 Raptor program in order to fund the purchase of more drones for service in Afghanistan and Iraq.
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dereferenced, technology
Steal a little and they call you “thief”… Steal a lot and they call you “King” – Bob Dylan
I try to avoid the news during the trading day. I never trade manually and as I’ve mentioned before, I’ve never yet had much success trading the news and none of our models presently use news feeds for decision-making. So I really try to avoid keeping excessively abreast of the news as it’s just a distraction from real work.
would-be king
That said, this morning I noted a pretty good jump in our pre-market p&l and wanted to see what splendid news had prompted the spike. So I scanned some headlines.
On Bloomberg I saw:
•U.S. Payroll Cuts Slow, Jobless Rate Unexpectedly Falls as Recession Eases
•AIG Reports First Profit in Seven Quarters After Investment Losses Shrink
•Dollar Advances as U.S. Employers Cut Fewer Jobs Than Economists Estimated
Unemployment down? AIG profitable? Dollar rumbling to strength? Splendid, splendid and splendid.
I also saw the bit about Hank Greenberg paying the SEC $15M as he “thought it would be good to get it behind us.” Indeed, good thinking.
And anyone looking at the news this week knows that regulators are likely going to put the kabosh on flash orders and that Goldman trades profitably. (And they improve!)
my kind of fat tail
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dereferenced, our managed markets
