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Old 02-25-2011, 08:20 PM   #9

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Re: Is This Too Good to Be True??

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Originally Posted by feng2088 »
Thanks Tams. I am using tradestation and I have the dots plotted. They look good.
The one big weakness with either back testing in tradestation or using the tradestation simulator is that with limit orders - if the price is hit you get a fill which is far from the reality in real-time, real-money trading.

If price just touches your limit order price once for a brief second your limit order will be filled and you will quickly learn that is hardly the case in real life. I know one beginner that was training on the simulator, making well over 100 round trips per session and always netting more than the daily range. Real time the same approach was a disaster.

The results from limit order back testing or limit order simulator trade in tradestation are not only unreliable they can be very misleading.

None of this means your approach won't work but please be aware of the above and be careful.

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Old 02-25-2011, 10:16 PM   #10

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Re: Is This Too Good to Be True??

wow..Thanks UrmaBlume...I didn't know that. Is that because TS is too slow and they need to re-route my order from their server to exchange? will change my broker help?
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Old 02-25-2011, 10:51 PM   #11

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Re: Is This Too Good to Be True??

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wow..Thanks UrmaBlume...I didn't know that. Is that because TS is too slow and they need to re-route my order from their server to exchange? will change my broker help?
No, I believe that tradestation is plenty fast for almost any human operated system and completely inadequate for anything approaching an automated high frequency system.

The condition only applies to back testing and the simulator. It has to do with the programming because in both the simulator and in back testing the software has no way of knowing your position in the queue for fills so it simply fills the order when the limit price is touched.

In tradestation back testing and in their simulator your limit order is always first in the queue for fills. If that were true in real life anybody could kill the markets.

To verify what I am saying simply open the simulator place a limit order and you will see that the moment your price is touched you are filled. Place a real-money limit order and you will soon see that such "first touch" fills almost never happen and when it does is is usually because price ran through your limit price and in the wrong direction.

Another little know point about tradestation back testing is that while minute and higher time frames can show fills inside the bar in back testing, tick, volume and range bars only store 4 prices, HLOC, so the software, during back testing can only see those four prices during testing.

The ten tick bar you reference is, on average, for less than 100 contracts which means there will be almost 1 bar per second during the average session, very fast for a human operated method.

Another caveat to your method is that you must achieve a very high hit rate when your profit target is less than half your risk/stop loss and even more so when you are paying retail juice.

Again none of this means your method is wrong but some years ago me and a couple of pals paid a hefty price to discover what I have mentioned here.

good luck

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Old 02-25-2011, 11:44 PM   #12

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Re: Is This Too Good to Be True??

This is extremely helpful...I will test it out with some real money next week and let you know how it goes. Thanks again
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Old 02-26-2011, 12:07 AM   #13

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Re: Is This Too Good to Be True??

Stupid question--- do you know if the order would be cancelled if it didn't get filled on that 10-tick bar? I don't want it to be filled 5 bars later
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Old 02-26-2011, 01:38 AM   #14

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Re: Is This Too Good to Be True??

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Stupid question--- do you know if the order would be cancelled if it didn't get filled on that 10-tick bar? I don't want it to be filled 5 bars later
In the simulator and in back testing it will fill on the first bar that touches the limit price, in real life there is no telling which bar it will fill on as that is dependent on both price and your position in the queue. In both the simulator and real life the order will remain in place until it is filled, canceled or the market closes.

I have tested such models that when automated and run on the simulator made well over 20-30 points per day, every day - but when run for real money - lost their ass.

The people that do this successfully don't use tradestation, they are co-located and have the ability and capital to constantly "stuff" and cancel orders at size at several levels both above and below the last.

This kind of model is a very fast example of mean reversion trading and while a lot of people don't like the fact of it, it is what keeps our spreads so tight and benefits the retail trader.


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Old 02-26-2011, 11:03 AM   #15
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Re: Is This Too Good to Be True??

UB, thanks for informing him of the issue with sim fills vs real limit order fills. I just assumed everyone knew about that aspect of the high hit rate systems...

feng, if you're staying with TS for this, one tech that has worked well for me with some systems is to run the system on a one tick chart (with setups signals coming in via ELC/ADE from your other 'time frame(s)') and go to mkt when price gets to or through where your limit would have been if you were still using limit orders.
Doesn't work for all systems but is generally a good way to test the viability of these 'too good to be true' systems. Slight drop off for some systems, which we just have to figure out a way to claw back some other way... hth
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Old 02-26-2011, 11:21 AM   #16

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Re: Is This Too Good to Be True??

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Originally Posted by zdo »
UB, thanks for informing him of the issue with sim fills vs real limit order fills. I just assumed everyone knew about that aspect of the high hit rate systems...

feng, if you're staying with TS for this, one tech that has worked well for me with some systems is to run the system on a one tick chart (with setups signals coming in via ELC/ADE from your other 'time frame(s)') and go to mkt when price gets to or through where your limit would have been if you were still using limit orders.
Doesn't work for all systems but is generally a good way to test the viability of these 'too good to be true' systems. Slight drop off for some systems, which we just have to figure out a way to claw back some other way... hth
The problem with the EL Collections/ADE toolset is that tradestation still has a 1 minute time stamp so that collecting data, even in real-time from other time frame charts is useless and even sometimes "peeks ahead" for any time consideration less than 1 minute.

This problem is still relevant in TS 9.0 even with their new PSP (Price Series Providers) objects.

I don't know what is wrong with TS so that they bring strategy network when the tools they offer are deficient for strategy development and then bring these great data provider objects and smart order placement tickets and yet still operate in a 1 minute time frame in a millisecond world.

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