Quant Macro Investing

Risk Taking Disciplined

Working with a Programmer

The challenge of execution – in addition to intellectual powers to develop quant models, we need substantial programming resources.

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http://blog.traderslibrary.com/traders-library/2009/10/working-with-a-programmer.html

by Jean Folger // Jean Folger, co-founder of PowerZone Trading, is an experienced stock and futures trader. She is co-author of Make Money Trading: How to Build a Winning Trading Business.

***Most traders, whether greenhorns or an experienced fund managers, have ideas for trading indicators and/or strategies that they would like to test to determine how they would perform in the markets. Going through years of data and locating potential trading opportunities by hand is time consuming and, due to its tediousness and subjectivity, can yield flawed results.

Developing these ideas into code can let our computers do the hard work: backtesting, multi-variable optimizations, strategy performance reports, etc. Not all traders are capable programmers, however. Nor do all aspire to be. This is where an experienced programmer can help turn a trading idea into a testable, quantifiable trading tool.

Most trading platforms have a proprietary language that must be studied and learned over the course of years to develop elegance in coding that language. Finding a programmer experienced in the particular language is the first step. Many trading platforms’ websites have a list of specialists who can provide custom programming.

TradeStation has a list of EasyLanguage Specialists who have demonstrated to TradeStation that they are experienced, professional developers with a deep understanding of TS EasyLanguage.

Your initial contact with the developer can be a quick email stating the basics of your project (“I am looking to create a simple strategy based on a moving average crossover…”) to find out if the developer has the time and expertise to work on your particular project.

If the developer indicates that he or she can accept your project, you can request a Non-disclosure Agreement if you want to protect your trading idea before releasing more details. After you send a detailed project outline (please read Tips below), the programmer will return a time and cost estimate for the project. If this is acceptable, you can give them the go ahead for the project. Some developers will require some type of down payment (usually 50% of the estimate) upfront. Others will bill after the project is complete.

Plan on reviewing and testing the indicator/strategy when the developer sends the first draft. Unless the project was very basic and straightforward, some type of revision is to be expected. Either your specifications were not 100% clear (even though they were clear to you) or the developer interpreted your idea differently than you expected. Most developers do not want unhappy customers and will work with you to provide a solution with the various tweaks and revisions. You can also request a consultation session to go over the variables and nuances of the indicator/strategy as programmed. This will typically be billed separately from the actual programming.

Once the project meets your specifications, you can thank and pay your developer, and start enjoying your shiny new code.

Tips:

Any ambiguity in your project specs will only cause frustration (to you and your programmer) and ultimately more money in development costs. Almost any idea that is quantifiable can be programmed (depending on the limitations of the platform). You will do yourself a favor if you provide only absolute rules to the developer. Here’s an example:


An example of concise entry and exit logic.

This is just an example…it shows definite entry and exit logic. It is also helpful to include any specific markets and intervals that you plan on using (for example, the e-mini Russell, 5 minute chart). If you have pages and pages of rules, try to narrow it down to one page for the initial project. You can then add filters through additional programming. This tends to be more cost effective (and easier to troubleshoot) than having a programmer sort through pages of ifs and thens.

Working with a seasoned developer can be a great experience. You get to turn your ideas into functional tools without having to learn your platform’s proprietary programming language. Be as clear and concise as possible, be completely objective in defining your project, and expect some time for revisions.

Visit www.powerzonetrading.com for more information!

October 16, 2009 - Posted by | Uncategorized

3 Comments »

  1. As I know, there are two kinds of developers, one kind is close to Modeling, and they use C++ and Matlab more; the other kind is close to IT, and they use .NET and SQL more. Which kind do you mean here?

    Comment by Bruno | October 17, 2009 | Reply

    • I think the latter (.NET, SQL, etc) for us.

      Reasons – we (the fund manager) are exploring the feasibility of a scheme. Such scheme would require lining up with external parties to develop quant trading models, and once a model achieves certain performance benchmark, we will supply the necessary IT infrastructure to enable the model to trade in the real market with real monetary capital.

      The initial focus would be the opposite of HFT (high frequency trading) – we would want to focus on quant models that do not demand as much execution speed.

      1. We (the fund manager) to outsource the part of quant trading model development to external parties (these external parties, or “model creator”, who will handle C++, Matlab, etc). We want to leverage Internet to attract the best brains of creativity (worldwide). One way is to attract through organizing a contest

      2. We will supply trading ideas and provide feedback on ideas and questions by model creators. When creators are done with the models eventually, we will test the model’s performance.

      3. We then use the model to trade for real money, or observe with real prices. The performance and P/L would be tracked (supported by reputable external service provider in accounting and settlement, plus top auditor like the big-4)

      4. Model creators may want to provide us the model as a black box. While the lack of transparency may be OK initially for money making, I worry it may eventually bring problems for risk management, internal control and other issues.

      Clearly the scheme requires more operational details, but you get the general idea.

      Comment by vicktorquant | October 18, 2009 | Reply

  2. Hi Vicktorquant – just wanted to say a quick thank you for linking to our blog, http://blog.traderslibrary.com/traders-library/. — Jody

    Comment by Jody | October 23, 2009 | Reply


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