Ask HN: Before launch – everybody says "dont connect the trading engine" – why?
Hi HN Community,<p>during the last couple of weeks i spend a lot of time on building a fully automated trading engine.
Some kind of &quot;disclaimer&quot;: im now in the financial space since ~13 years, working for startups, creating new banks and working for them.<p>While i&#x27;m not an &quot;equity guy&quot;, i thought there should be some potential when playing around with some of the data feeds: it should be possible to build a fully automated bot, which is just a simple trend-following model and the system should just jump on running trends on whatever mega-corp stock, go with them some days and then exiting.<p>So i started to build an engine which contains all the things i learnt during this interesting journey:
the system reacts dynamicly depending on different market structures, it also integrates events (like earnings dates etc), it goes long and short, it captures trends for only 2 - 3 days sometimes.<p>Now, im that convinced that this application should work under real market conditions; during development, i also made sure that the system works under &quot;live conditions&quot;, meaning that data is added incrementally to the algos etc. (i found out there are a lot of wrong calculations&#x2F;indicators&#x2F;chartings out there which are failing if you connect them to a &quot;real&quot; datastream, since very often a massive mistake is done during development: presenting the &quot;data as a whole&quot;, which leads to perfect results in testing, but fails completely under live conditions etc.)<p>A special perk with the application is the following:
in my country, there are special leveraged products available (turbo warrants), which are just replicating the increase&#x2F;decrease of an underlying by given scale&#x2F;gearing, just that simple. Those are nearly risk free if you hold them only for a couple of days with a decent lever&#x2F;gearing.
I say nearly risk free, since, for sure, the position may crash if a completely unknown Unknown appears (like a military event or similar)
Applying a leverage to the trading behaviour magnifies the results massivly, it should easily be possible to get 400-500% per year.
The math is very simple: the system is shooting at currently 150 symbols across NASDAQ100 and SP500, jumping onto the short-term trends, regardless if long or short, and applying a lever&#x2F;gearing of 3 - 7 and then reinvesting, rinse and repeat for one year.<p>Why automation is the only way to win as &quot;active market participant&quot;:
Most people have 3 - 10 stocks in mind when thinking about investing, and maybe they are following 20-30 items on their watchlist &quot;which they watch from time to time&quot; - if they are watching it at all.
i have a different perspective: analyzing the biggest stocks worldwide on a daily base an computing my entries&#x2F;exits, there are opportunities every day. Its not about &quot;doing this one big trade&quot;, its about continuous and reliable but smaller returns on a reliable basis: The system is handling around active 30 - 50 positions under normal conditions (and my starting budget is limited...)
Automation on a larger list of strong stocks is the only chance to outperform, in my oppinion.<p>Now i showed all of my ideas, results, data and code to some people to get some feedback:<p>- all of them are &quot;equity guys&quot; and working in the field as &quot;investment fund manager&quot; or similar or they are working at larger banks in whatever departments<p>- none of them is a CS-guy understanding anything of coding etc.<p>ALL of them say that i shouldnt connect my system to the real market since it will quickly loose money - and the only answer, when i dug deeper, was:
&quot;...because there have been others before you who thought they were smarter than the rest...&quot;<p>So - who is wrong? Is it me and i oversaw something critical?