SMB has been working on building out a systems trading desk for about a year. At the heart of this effort is a series of algorithms that detect changes in momentum and trend. From these algos we have developed various strategies. One of the cool byproducts of this process will be the creation of some pretty awesome tools to enhance the performance of our discretionary traders.
Imagine as a discretionary trader in the first 30 minutes you have identifed 8 stocks that you believe will offer great opportunity for a particular day. But you are concerned that you may miss some of the best intraday entry points. In the very near future SMB traders will have the ability to enter various tickers into a GUI and have our algo decide when to open long or short positions for them. They will be able to manually trade out of the positions or use various criteria to have another algo exit the position instead. Very cool stuff. The future of discretionary trading.
This morning on the Open I traded WAG. I have marked up a chart from Freestockcharts that show the three trades I executed. The second chart below shows a series of automated trades from the SMB Algo synced with the time frame I trade on the Open (blue arrows were buys and red arrows were shorts). Who did a better job? Spencer or the machine? I did have to leave the desk at 10:00 o’clock to work on other firm BS but the algo kept on chugging along.
One of my favorite things about the SMB Algo is it is “in sync” with my trading style. If price action indicates higher prices it gets long. If price action indicates lower prices it gets short. The one thing it can’t do is recognize levels from earlier trading where there were large buyers or sellers. Those levels can be very important for intraday trading. Perhaps in the future we will find a way to incorporate that information into our strategies. If that happens there will be very little left for me to do on the trading floor. That would be nice 🙂
7 Comments on “Man v Machine—(Spencer v SMB Algo)”
I can’t figure out why it is that when i pull up wag on freestockcharts for either one, two or three minute charts, none of them look like the first few minutes of your chart. ??
I would be very interested if you would post your trades like this more often. It is a great exercise to watch the tape and try to figure out what you saw. Of course, you could just tell us, but I have a feeling it won’t happen that easily 🙂
michael,
every once in awhile i write a long post and describe the technical reason or tape factors that caused me to make a particular trade. the truth is it takes a VERY long time and a lot of mental capital to write a post like that. if u check the archives i wrote a post called “my thought process in LVS” that u may find helpful.
steve
When can I get my hands on that trading algo?
The future of trading indeed. I was wondering if (and when) you guys would start using automatic (or semi-automatic) systems. I think I have an answer 🙂
I agree that the point is to build a system that fits your style ; it is much easier to let the system do its thing then.
A technical question : are your algos able to read the tape ?
Good Morning Steve;
Great post. About the volume @ price.
I notice you are using tradestation, you can setup market profile indicators which will show the poc ( highest volume traded ) for the previous day and also the current poc as it is evolving. I think the code for market profile studies are readily available for tradestation.
Well, that will be good to secure and make sure the security of their machine. It’s very important to every company or bank to make sure that their machines are working well and safe.