Robo Trader

As I mentioned in my last post, I’m transforming some of my trading methods from discretionary to mechanical. The results from the back testing I’ve been doing are too impressive not to put real money on the line and see if real accounts can profit as much as virtual ones have in testing.

Trading mechanical systems is an undertaking all its own. You have to be disciplined to update your update your stock lists, run your scripts, and create new buy and sell orders for the following day, every day. The program I’m using generates a lot of trades because the average holding period is measured in days as opposed to the weeks or months longer term programs hold positions.

The brisk trading activity can be somewhat grueling, but trading mechanically has its advantages too. For instance, I focus far less on market fundamentals, earnings, press releases and timing the trade. Instead I use my time creating and using scans that will select the top performing stocks to include. I want my universe of stocks to include the best performing companies as well as those that have just emerged and are making powerful moves. My “universe” of stocks includes about 1200 stocks right now, and at any one time we’re holding around 25 positions.

For the last ten trading days the average daily return has been an impressive .22% a day and that extrapolates to over 50% a year. Of course ten days of data does not a trend make, but I’m cautiously optimistic with the results to this point.