How to generate trading strategies:

1) Data mining
2) Observation

Observation is simple. You observe and read charts bar by bar for a long period of time. Write down some patterns that crop up.

Test the pattern, if it has good risk-reward metrics, trade it.
Data mining is a bit more complicated.

Come up with different factors that could affect the markets.

It could be

- Seasonality (day of week, week of month, month of year)
- price based factors (highs, lows - combined with seasonality - previous day, previous week/mo/y)
- Time based factors (enter upon x mins after open, exit x mins before close, enter on x day, exit 1/2/3/4 days/weeks/months later)

- Volume based factors (decreasing volume, increasing volume, > x * average volume, etc.)

- Volatility (increasing vix, decreasing vix, etc)
If you're trading options, you can derive factors such as

- Trading ATM, ATM+x, ATM-x strikes
- Buying vs selling option of the specific strikes

and you can get creative with greeks also.

- Indicators - different indicators you think you can use.
Once you list down such categories of factors that could play a significant role, you then combine 2-3 such factors (don't go more than 4) and generate combinations.

Based on how many factors you list, the combination list would reach 2-3 million or more.
Now, you have to backtest those 2-3 million combinations, and rank them based on few parameters. Risk-reward, CAGR, max drawdown, number of trades, win rate, etc.

Check for statistical significance using statistical tests.
Once you do that, trade the top 10-25 of the ranked strategies.

This is how few quantitative funds generate strategies to trade.

They
So, the ideas based on OBSERVATIONS usually have much higher longevity when compared to the ideas that come out due to DATA MINING.

Observation is hard to make.

Data mining is easier to do with computational power.
That is also why these data mined strategies may or may not work in live, and usually stop working at some point abruptly, and that is also why you have to keep churning strategies to trade, and consistently rank them.

It's almost like a rebalancing a portfolio of strategies.

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More from @theBuoyantMan

1 Mar
Generally speaking, I don't see a correlation between Zerodha and other brokers in glitches/down days.

When Zerodha is problematic, Angel, Kotak, Sharekhan, Motilal, etc., work fine.

Generally, having one or two backup brokers with funds split up, should help de-risk yourself.
If all the brokers are having issues on the same day, then it is not a day you would be worrying about broker platform or execution.

There would be much bigger things to worry about on that day.
Generally, with respect to angel broking, try and contact the main branch (Mumbai I guess) through connections who are connected to the right people inside, to get your account opened.

If you go through other branches, you'll most likely have issues with customer support.
Read 5 tweets
27 Feb
If someone says they are trading for passion, and they aren't in it for the money - they are either gambling, or they are bluffing.

You can't not trade without money on your mind.

But that's also the most counter-intuitive thing in the world of trading.
You can say you're trading for passion, coz markets are dynamic, because you like a challenge, because it's always evolving, because no one gets to boss you around, and hundred other reasons.

But you wouldn't quote any of that if you're a losing trader.
No rational person keeps losing money in trading, and then continues to do it because they're "passionate" or they like the "challenge".

You have to do it for the money; and without making money from it, you CAN'T continue doing it.

If you still do, you're a compulsive gambler.
Read 4 tweets
26 Feb
I went long on BankNifty March04'21 35600CE on 24th February.

I couldn't exit before NSE halted.

IBKR didn't have an extended trading session.

I'll try to summarize my experience on managing that position's exit in this thread below. 👇👇
1/ I was forward testing a system based on banknifty futures since September and was conservatively trading until Feb.

Between September and Feb, it made about 150%+.

I felt it was time to begin aggressive compounding, but kept postponing.
2/ After painfully letting go of the opportunity budget day and the next day's rally with conservative lot size, I got enough courage to not be chicken, and decided to aggressively compound from 24th.

I decided I'd start with 3 lakhs, 6 lots Futures.
Read 40 tweets
24 Feb
NSE went batshit crazy today. My hands are itching for a thread of the week. NSE gave an opening.

What are the lessons we can learn from today's exchange fiasco?

Time for a thread. 👇👇👇
1/ If you're going towards full automation, factor in data feeds.

Have multiple data feeds.

If for a set amount of time, different datafeeds don't update, work out the code in such a way that you'll exit all open positions upon quote refresh, based on how the market is.
2/ Have redundant brokers. I have been stressing on this for quite a while now. It's important to have reliable brokers you can call and manage your positions with, properly.

Or you should have a functional broker who will let you put on/close trades.
Read 16 tweets
8 Feb
Poverty is a curse.

If you're a man, and you're poor, there's no telling how much you'll be pushed around by the society around you.

Time for a thread. 👇👇👇
1/ Your self-respect and integrity goes for a toss.

Men in the society are EXPECTED to be the breadwinners.

Once you're 20 and above, your MANHOOD is defined by your ability to earn money.

And it's not just "enough to scrape by" money. No. You won't get respect for that.
2/ The men who are respected, envied, and looked up to in the society are those with the most money.

There are EXCEPTIONS to this. But, exceptions don't become examples.
Read 52 tweets
6 Feb
I have been an Interactive Brokers user in India as my primary broker.

Other than IBKR, I have had the following accounts

- Zerodha
- Angel (as part of Minance)
- Fyers
- Finvasia

A thread on IBKR and WHY IBKR 👇👇👇
1/ I was introduced to Interactive Brokers by a person who works with Oanda (a forex operator).

I liked their philosophy - they mainly cater as prime brokerage for small hedge funds and HNI people.

They are primarily risk averse, with focus on execution and stability.
2/ Account opening process took 40 days for me. I was fine with it. I had tried their demo and I was sold on their desktop platform.

Although the UX initially seemed like operating a NASA console, it grew on me and I have grown fond of the customisability.
Read 23 tweets

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