Inspired by another thread, I have started this one on AutoTrading to see what experience members have with it and to see how we might be able to, at least partially, automate the trading of our own systems. Portfolio123 is based on developing and testing whole portfolios but when it comes to implementation we are back to trading individual stocks and all of the related issues. This typically includes lack of discipline in following the system exactly and getting hung up on an individual stock. I would like to be able to trade the portfolio instead. Also, there is a big time availability issue for many of us.
Each week we get a rebalance email - in the ideal world a single click would carry out (or at least initiate) the transactions recommended. This not being an ideal world, I’d like to solicit ideas of what people are doing in this area and what might be done.
I am aware that some brokers (eg InteractiveBrokers) have the capability of allowing trading via outside applications (including Excel). There is software called TradeBullet for this purpose but I have no experience with it - I’m sure there are others.
Seems that what is needed is an interface between P123 and an external application. The simplest and easiest to implement might be to have the Rebalance email recommendations also in Excel format - this at least would work for IB. At the present moment one could download (into Excel) the transactions after rebalancing a port and cut n paste into a trading application. Haven’t done it yet but moving in that direction.
There are a number of members “autotrading” and recommending based on P123 ports but I’m looking for ways to help automate my own ports.
Marco, has this been discussed at all and what are your thoughts.
The only problem I see with autotrading is that P123 focusses on small cap stocks. These will have to be handled carefully since the slippage may be crazy if you try to autotrade these.
Other than that this it looks like an excellent idea. Tradebullet looks like a good place to start. They claim to be able to take instructions from EXCEL. You can download free trial version. http://www.tradebullet.com/products/tradebullet/
I agree about the problems autotrading small stocks. Still, a big chunk on my portfolio is large and mid cap stocks and I’d like to be able to put these on auto-pilot and focus my trading efforts on the smaller ones. Even returns like 30-40%/yr (which you can get pretty easily with P123 large cap) is way better than say mutual funds or etfs and are worth the effort. I just want to make that effort as little as possible !
I’m going to check out TradeBullet - I’ll report back
Lindsay
I seem to recall that your “Robust” ranking system gives good large cap results
Lindsay - I don’t believe 30-40% is easy to get with LargeCaps. Very difficult in fact. I’m hoping that an EXCEL ranking system add-in becomes available soon (P123 hint, hint). I believe this will stimulate new efforts into large caps.
You can also check out http://www.autotradersoftware.com/. I found out about this one on the InvestorRT page. Don’t know what is worth, according to the website the last update is from November 7, 2005. Kind of dated, but if you give it a try let us know what you think.
I believe auto-trading is essential to mitigate psychological issues.
Indeed p123 offers it with their own portfolios. Hence, it can be done.
Marco, there are several brokers who accept auto-trading, including Interactive Brokers, and I believe this feature would be useful to many subscribers.
There are companies like Tradebullet that have been working on autotrading for quite some time and by now they have sorted out most of the issues. (Autotrading can be a big can of worms.) So I’m not sure this needs to be a necessary task for P123. It could sidetrack them for a long time when there are many feature requests that haven’t been implemented.
In any case, to make it work with P123 I believe it needs to have a feature to initiate the broker’s instructions with a limit order then convert to a market order if not filled when bid / ask narrows to a specified value. Then what happens when many P123 users are trying to buy the same low liquidity stock on Monday morning? Partial fills, eligibility to hold a stock (in retirement plans) etc, etc. It could be a mess when done automatically.
I agree that we don’t want to “reinvent the wheel” by having P123 doing a lot of programming to achieve what is already available in an outside application such as TradeBullet. What is needed however is the interface between the P123 Rebalance email information and the application. TradeBullet seems to be able to interface with Excel hence my suggestion that the rebalance recommendations be available in Excel format. Or, could one of our enterprising “addin” programmers take a look at this - probably pretty simple to a programmer but its a bit beyond me.
Not sure why the Monday am “pile-on” would be any worse than it is now. In any case, studies (limited) I’ve done indicate that executing the rebalance trades any day Monday-Friday gives pertty much the same results (ie “slippage” around 0.3 - 0.5%). I personally trade any day but Monday.
“Not sure why the Monday am “pile-on” would be any worse”
I think the reason it is not a problem now is because it handled manually. You don’t want everyone’s shares to be bought at exactly the same time without thought for the consequences
I would certainly retain control over the timing of the rebalance. What I would like to be able to do is submit an order for a “basket” of stocks rather than individual stocks.
It would be nice to play around with Tradebullet or other autotrade software to find out what parameters you can adjust (timing, conversion of orders from one type to another, etc.)
If no one here wants to take on the task of converting from EMAIL to tradebullet it might be possible to get an outside programmer to do this. There are people floating around C2 website who eat this stuff for breakfast. There are also some low cost (read Indian) s/w coding companies on the internet that could probably write the I/F software for a couple of hundred bucks.
I’ve just noticed that IB already have the capability of accepting “basket” trades i.e. multiple orders that are submitted simultaneously. Also, that baskets can be generated in Excel format.
So it seems that if we can get the rebalance trades from P123 in Excel format at least I’ll be happy. There is a slightly more cumbersome approach which is to accept the rebalance recommendations then download the transaction file into Excel and edit out all but the current transactions.The
remaining transactions can be submitted as a single basket order.
I should probably know this already, but don’t, so I’ll expose my ignorance on this issue. I understand that the weekly portfolio performance reports are generated over the weekend, and that automatic rebalances are performed over the weekend. However, are there any fundamental database updates performed over the weekend that makes the weekend a superior time to rebalance a portfolio rather than during the middle of the week?
We spoke to TradeBullet and the interface to route recs through their app is certainly doable. However it would add an additional $50/mo for TradeBullet. How may users are willing to add that montly cost for automatically routing orders (and reconciling execution prices) ?
The problem I have is that the brokerage firm I deal with apparently doesn’t support auto-trading.
But if it did then I would be interested for a couple of reasons. First is that I hold at least 70 stocks at any given time. There is the “how much is my time worth” argument. And secondly the reduction in number of errors that one might expect.
When I think of the process I go through selling and then buying smallcaps manually, I doubt that a simple EXCEL to I.B. interface would be sophisticated enough. Although I’m not sure that TradeBullet would work either.
The weekend update is a full update and it’s generally more reliable. Reuters gives us incremental updates during the week and if anything is missed it gets refreshed in the weekend. For example today we were not able to update the database because of missing files on their end. The stocks that reported today will not get updated until the weekend. This is not the norm and when it happens we report it.
Ideally I would like to enter ‘pegged to market limit orders’. Lets say I want to buy ABC. The stock closed at $30.25 yesterday. My limit price includes a 0.25% slippage, so $30.25 * (1 + 0.25%) = $30.33 limit price.
However, if the stock opens lower or hasn’t reached my limit price yet, the order should track the current ask price, plus an offset I indicate. For example, ABC is trading at 30.02bid/30.21ask (a 0.67% spread) and my offset is -0.03. My order is entered at 30.18 and will keep readjusting everytime the ask changes, up to 30.33 (my original limit price).
I found another site that offers automated trading. Apparently you can set your own rules (or use theirs). This is an offspring of AMERITRADE so they should be solid.
