By: Matthew Zimberg President, CTA

It does not matter if you are a self-directed trader, use an automated system of your own or other vendors; there is one key factor behind it all:

Methodology + Execution=Results

The purpose of this short description is to discuss trade execution which many investors/traders lack information about. Initially, the entire focus is on the Methodology and obviously the profits and/or losses behind any system depend on its methodology, and its logic in analyzing past behavior over a given time-frame.

However, proper execution of a given methodology can be a factor in contributing to improve or worsen a system’s performance. Many brokers and system developers talk about slippage, but there are many other factors that can drive down the performance of a system.

We, at Optimus feel that if a brokerage firm advertises the use of automated trading systems, they should at the very least meet the following criteria:

Personnel:

Anything that is mechanical, software driven and/or relies on any type of technology will experience down-time.  It’s a question of “when” and not “if”. The personnel has to be knowledgeable and ready to either stop the system, and/or switch to manual execution to offset or trigger any positions.  Familiarity of the staff with the different software and trading programs will allow a fast response time and smooth transition while the automation software is once again functional.

Fast and uninterrupted Internet Connection

When a signal is generated and a trade needs to be executed, communication must be transmitted at lightning speed to the exchange. Since most orders are “At the Market”, it needs to get filled ASAP. The difference between where the system should be executed theoretically and where it is executed in real life is called Slippage. The goal is to minimize slippage.

Back Up Internet Connection

Although a home based internet connection is connected via one line, it should be noted that a business should have a minimum of two connections. In the event that one drops, the other will pick up the connection.  We at Optimus have created a “Bonded T1 Lines” where we have two T1 connections in case one drops the other will pick up. In the event that both drop, Optimus has also a cable line to pick. The connectivity throughout the day will alternate between those services that have the highest speeds.

Electricity Backup

It is advised that every computer will have individual back up battery in the event there is an electricity shortage. This would allow alerting the necessary parties that power needs to be restored. Ideally, there should be an offsite trading facility to transfer the entire operation to while the backup provides this temporary solution.

Signal Generation vs. Order Generation

This is something that traders need to grasp. There are platforms that are being used for order generation, but they don’t actually fire off the trade to the exchange.

Why is this important for you? Because communication, speed and interaction between the two sides may have negative consequences on your trading.  The execution machine and the order generation have to communicate at fast speeds for accurate execution while they are both connected at all times.

Why? Trading systems are being written in code, sometimes the code has to be on one machine while an order execution is attached to it. Let’s use an example.

TradeStation (TS) is a highly recognized platform for traders and systems developers because it allows the use of Easy Language which is a very common programming language for traders. However, TS could be used as a brokerage or you can simply use it as a platform to generate signals. You can hook up your TS to an execution machine of your choice. We for example, use NinjaTrader or TradeMaven, which are the execution side to the exchange. Essentially the two machines are “talking” to each other on the same server, while the execution machine fires off trades to the exchange as the methodology dictates.

Data Feed and the Execution Machine

There has to be a data feed coming from the exchange in live stable and streaming manner.  Whatever instrument you choose to trade it must feed both the signal generation machine and also the execution machine. Some data streaming are better than others. We at Optimus use institutional grade quotes such as CQG and Rithmic.

In Summary

We have tried to provide you with the most basic elements that a broker executing systems trading should have at his disposal. At the end of the day, a brokerage in this field also has to be highly forward looking entity seeking the best solutions for its trading clients.

Please call us at your convenience if you have any questions. 800 771 6748 Open a Futures Account for System Trading Here

Best,

Matthew Zimberg

What can your broker do to create a top notch facility for automated trading execution and WHY you should care? is a post from: Futures Trading Blog for Independent Self-Directed Traders and System Traders

This is what Jennifer, our office manager at Optimus Trading Group wrote.  Her words  show her spirit. This is what Optimus is.

Matt

Happy Friday Guys!!

Today is September 11, a sad day to remember in the history of our country.  I woke up this morning and started thinking of all the people that got up to go to work that morning thinking it would be just like any other morning but they never got a chance to go back home.  Then I thought that some of those people were probably having a very stressful morning, where everything goes wrong and stress starts consuming the day.  I thought of how many people woke up and didn’t feel like going to work but knew they had to, of those who caught traffic on the way to work and cursed at the cab driver, the dog walkers, and even the ambulance that was blocking the intersection.  Maybe some of them spilled coffees on their shirts, and blamed it on the stupid lady at Starbucks that didn’t tighten the lid properly.  Then when they finally made it to work that morning, they were already too tired and frustrated to say good morning so they rushed to their desks without saying hello knowing that they already had a pile of work waiting for them and they didn’t have any time to waste with small talk. And then their worst nightmare happened…and I can’t even imagine the despair in their hearts, the pain of their families, and the feeling that they never got a chance to say  good bye, thank you or I love you.

I don’t want to be that person who is too busy at work to say good morning with a smile, to be pleasant even when work is stressful and most of all to say thank you.  So I am taking this chance to THANK all of you for being so good to me.  For helping me as much as you can with answering the phones when you know I am tied up, for bringing me coffee when it looks like I am about to pass out on my desk, for having a great sense of humor even in times that I am not up to joking with any of you.  Thank you for offering a helping hand carrying all the heavy stuff that I bring from the store, for being gentlemen and opening doors, for being patient and kind, and most of all, thank you for being friends that I know I could count on!

We spend a lot of time together, so in a way, we are like a big second family…and just like family, sometimes we disagree, sometimes we argue, sometimes we end up taking out our frustrations on each other.  I apologize for my actions lately, I don’t want to let stress get the best out me anymore!  I know that Optimus is growing and I am happy because that means that we are a little bit closer to achieving our goals & dreams.

For the time being, we don’t have anyone in the office to assist me with the new accounts, and fortunately we have a lot of new accounts coming in.  I need your help so that I am able to process everything correctly and on time.  There are a few little things that I am asking of you guys and I hope you could understand that it is for your own benefit as well.  I would really appreciate if you could send me emails with your daily requests as  you have started doing, because when you come over to my desk and just spill the beans, I have so many other things that I am working on that I might totally forget about your request and it won’t get done.  Please keep helping me with the phones, if it rings more than twice and I don’t pick it up, that’s a good indicator that I am either on the other line or I stepped away from my desk.  Other than that, please be patient, I didn’t forget about you and I am trying to do the very best that I can to answer all of your questions, process all of the accounts, etc.  Keep in mind that there are more of you and only one of me.  I really do appreciate all of your help!

Lastly, Matt is going away this weekend, and I am hoping that we could count on each other and be accountable and reliable for these three weeks.  I am counting on each one of you and myself included  to be even better and more responsible.  Let’s make him proud upon his return.  He has been good to us and his hard work reflects on the success of his company.

Matt, have a great trip! Relax! Enjoy! We’ll be here when you come back! Optimus will be fine!

All the best,

Jennifer

World’s BEST Commodity Brokerage Manager is a post from: Futures Trading Blog for Independent Self-Directed Traders and System Traders

I had a customer that had phoned me today, who have asked me, “Why my broker who trades the same futures trading system, had different results than you?”

Well….”besides the fact that he  runs your system on the same computer that he annoys his prospects, twits his life’s “adventures”,IMs all his buddies where to meet after work, eats his lunch noodles on and jams it with  hardcore core programs that slow down the heck out of his  computer?”. Silence on the receiver.

All jokes aside, automated trading systems have to run on dedicated servers and minimum connectivity of T1. This is to reduce latency issues when you trade on shirt term intervals such as day trading and/or swing trading.  Data needs to come in in a clean fashion, accurately and allow the system to execute it ASAP. Otherwise, if you don’t, other programs could slow down the computer and cause delays in data and execution.

This might have a bottom line effect on the performance of the system.

If you have your own automated trading system, or have one trade for you, ask your broker about the things above. Might save you a penny.

Matt

read more here: http://www.optimusfutures.com/commodity-futures-trading-system.htm

How the Same Automated Systems have Different Results for Different Brokers? is a post from: Futures Trading Blog for Independent Self-Directed Traders and System Traders