AutoTrading

Research
21

Marco,

I’d definitely be interested in auto-trading our own portfolios for several reasons:

  1. Time saved. I guess most of us spend the entire Sunday evening doing rebalance + order entry.

  2. The advantage of having an autopilot when we are not physically available or we don’t have internet access (e.g., work, holidays, etc.)

  3. The ability to completely eliminate psychological biases and human factors. After all, we choose portfolios based on back testing and back testing does not allow for any human discretion. If we want to achieve the same results as such simulations we should limit psychological biases as much as possible

Regards,
Manuel

22

Marco,

count me in for being interested in auto-trading. As others have noted, I am also sifting through my port recs on Sunday and getting the orders ready for Monday. I’d be happy to automate this process and eliminate my own human errors (and sometimes bad judgment) that go with this process. At the same time freeing time to use elsewhere.

I understand there will be an additional fee for this service.

Werner

23

Everyone,

I’m confused. On the home page of this site it says:

"NEW PARTNERSHIP ANNOUNCEMENT
Automatically invest in Portfolio123 Models via Ariston Advisors. Ariston will invest your assets and automatically rebalance your portfolio to mirror the Models. It’s the simplest way to invest! "

Is this not the autotrading that everyone has been requesting in this thread?

24

I use Tradestation and unfortunately does not integrate with Tradebullet. TradeStation does offer Basket orders using a .txt file import system. I’d love to see a function in the Port rebalancing page that after a semiauto/manual rebalance allows me to download my committed trades.

File formate for TradeStation:
[symbol]delimiter[quantity]delimiter[order type]delimiter[limit price or limit type]

Delimiters must be either: spaces, commas, tabs
Each order must be on separate line

25

Chris

What that refers to is investing money with Ariston to be invested (by them) in one of three PF123 ports they have. It is nothing to do with trading you own portfolios. What I and others are interested in doing is to “automate” implemention of the rebalance recommendations we receive each week (for our own ports).

Don’t you do something like this at your site ?

Cheers

Lindsay

26

What we are talking about here is being able to autotrade without any manual intervention and order entry your own portfolios, not p123 model portfolios.

27

[quote]

Zordan,

I think that you are out of luck if you want to avoid manual intervention in the trading of customized P123 portfolios. I have been researching this pretty extensively in order to offer autotrading of my portfolios (mostly based on P123) from my newsletter, Intelligentvalue.com.

What I have found is that all the brokers require either the submission of an excel spreadsheet or an e-mail anytime there is a trade made. The stumbling block is on the broker’s end, not necessarily P123.

To my knowledge, there is no electronic relationship established between a mechanical, “black-box” or screener-type site (Rueters, MSN Money, MarketWatch, P123, AAII, etc.) and a brokers. It would require a sophisticated relationship set up between the two entities to transfer (electronically) the portfolio choices of hundreds of P123 members (for example) to be blindly executed by the brokers.

The feedback I am getting from talking to the VPs and other heads of business development for the brokers is that they are concerned about liability for executing trades from a remote third party.

Several of the more aggressive brokers have their own internal “trade triggers” as a feature to their customers, but these are very unsophisicated and don’t compare at all to our ports.

Even if a blind, electronic relationship between a broker and a black-box screener site were to be established, the account holder would probably be required to confirm the trade prior to its execution. Unless you have a mouse permanently attached to your arm like i do, you’ll probably miss some trades, such as confirming trailing stop sales.

This concept could probably be implemented, but it would take a highly motivated broker to do it. It may happen some day, but not without pressure from the public. So start e-mailing, calling and snail mailing your broker. In the meantime, buckle down and place those trades. Making money is hard work.

28

Hi all:

This discussion interests me a great deal since I am looking expand my tools…I have been trying to research this and have no experience with these firms to be able to make a decision as to what is best for me. Any help from you more experienced members would be greatly appreciated.

From what I can see there are several elements being considered at once

  1. the broker and their ability to execute different types of trades.
    At least some of these brokers are:
    www.TDAmeritrade.com
    www.interactivebrokers.com
    www.mbtrading.com
    www.tradestation.com

(It does not seem that Scottrade, Fidelity, Schwab handle complex trades??)

At various times I have seen posts that mention one or more of these companies. It would be great to somehow see their differences back-to-back.

  1. companies that offer auto trading:
    www.tradebullet.com
    www.smartquant.com
    nwww.ninjitrader.com
    www.cool-trade.com

Very little has been said about most of these and I can’t tell much from looking at their web sites. Can anyone be of help here?

There are two types of auto-trades sometimes being conflated
a) having a complete flow through system from P123 recommendations through final purchases (this seems beyond what is out there at this time)
b) getting the best price via an auto trading platform that takes the stock we give it and automatically reprices within given limits to get the best price to fill orders - for this I am not sure if the companies (2) are helpful.

For myself if a) is not possible then b) would still be of great help and save me from that “at the moment” hesitation or getting partial fills when a stock is just a pennies away from my single order price.

Thanks all,
Lawrence

29

“I am not sure if the companies (2) are helpful”

Lawrence - I’m not sure I follow your logic. If the companies that specialize in autotrade can’t handle the fill issues that you would expect from trading smallcap stocks then why would I.B. or MBtrading to be able to deal with these issues?

Steve

30

Steve:

It is becasue, and please correct me if I misunderstand it, the brokers MB, IB, etc. can do “pegged orders” etc. to get the best fill, while the auto trade comanies such as cool-trade look more like intra-day buying and selling. P123 gives a buy recommendation, you buy…then you wait until some time has passed day(s) - weeks - months until a sell signal is given and then you sell it. In short, the auto-trade companies do too much to fit in with the P123 design objectives…

Lawrence

31

This type of AutoTrading is done a lot with options with agreements between the broker and service provider. For example, OptionsXpress has agreements with over 25 service providers to do AutoTrades using what they call Xecute. It certainly seems that P123 could make a similar arrangement with several of the brokers such as IB and OptionsXpress.

32

Lawrence -

I have much to learn in this area since my brokerage doesn’t offer pegged orders so I am not quite sure what to make of it yet.

But if I.B. supports this type of order then presumably an autotrade program should be able to issue the order just as well as I can.

I generally trade P123 in my cash account (for retirement plan). This means I can’t exceed cash available. The manual “algorithm” I use right now to buy / sell stocks is something similar to the following:

  • put in a limit order for each stock to be sold. (Allow 0.5% slack from previous close)
  • wait until all are sold or for one hour. If not all stocks sold then examine the bid / ask spread to make sure the spread is narrow. Turn limit orders to market orders.
  • Wait until all stocks are sold.
  • examine if any buy quantities need to be adjusted based on the previous sell prices (i.e. is there enough cash in the account to satisfy the buy trades?)
  • put in buy limit orders for all stocks to be bought.
  • wait 15 minutes to see if the stocks have been bought. If not then adjust the limit orders or convert to market orders. Again adjust buy quantities if necessary.
  • at the end of the day capture all of the buy/sell prices and quantities and feed back into P123.
    At the end of the year put into proper format for tax purposes.

It seems to me that a spreadsheet issued to I.B. is not going to handle my “algorithm”. Although I am not familiar with all of the types of orders that I.B. is capable of. Maybe someone can help me out in that area.

Now I know that Tradebullet can do some things like limit order converted to market order after a period of time. And I have started to research CoolTrade. They mention something about stealth orders which seem pretty cool, etc.

Steve

33

Marco & all

Well, when I started this thread little did I anticipate the extent of interest/dicussion it would generate - that what the boards are all about. I used the title “Autotrading” perhaps by mistake - I certainly did not anticipate turning all my trading over to some third party. All I was looking for was some way to facilitate going from the Rebalance Email to real trades. I saw not only saving time and eliminating errors as advantages but also the “mindset” of trading a portfolio rather than a collection of individual stocks.

Here’s my “final” thoughts. There are obviously services and software vendors out there working in this area - we shouln’t be spending time on re-inventing the wheel. It is in their best interest to adapt the product or service they offer to work within the framework of P123. If they’re not aware of P123 then let them know.

My earlier suggestion was that a simple “universal” interface be created so that any third party application can easily take the Rebalance info and take it from there. It’s up to each of us to decide how “automated” we want that to be.

I suggest thet we have either and Excel download option with the Rebal. email or possibly cleaner and simpler is a table within the body of the email that is easily paste-able into Excel or other application. I believe that any external application should be able to interface with this - maybe some minor “massaging” to suit specific applications or brokers. Obviously before this can become a series of orders to a broker other info has to be added such as order type, price, offset etc.

Marco, as far as format I think that each trade recommendation is one line, and the columns should be :

A. Portfolio
B. Action (Buy or Sell)
C. Symbol
D. Number of shares.

No blank lines between portfolios.

Thanks to those who’ve give good ideas to this thread

Cheers

Lindsay

34

HI Lindsay -

I agree there is a need for a more efficient method of delivery than the rebalance EMAILs we get weekly. Certainly a pre-formatted spreadsheet would be of help particularly with certain brokers.

But I just want people to be aware that this is not going to solve the trade mechanics. Maybe an autotrade company could (they should). Thus there will still be a fair amount of time required to babysit the broker’s instructions even with a spreadsheet in hand.

Steve

35

Steve

I agree

Lindsay

PS You should check out IB - they have wide array of order types that will help a lot. I’ve just opened an account andstlii learning but it looks very promising.

36

Even without “autotrading” this would be a huge help.

Kit

37

I talked to my broker about “Auto Trading”.

They said that the mechanical / programming / interfacing side of organizing this can be solved. The big hurdle seems to be legal.

They must be legally assured that you want to enter a certain trade under certain market conditions/circumstances and free them from any liabilities resulting from this.

So there you have it.
The only chance I see for making this happen is convincing one of the smaller “Auto Trading Brokers” out there. They must still have high motivation to make this workable.

Werner

38

Auto trading is already in use at several brokers. As mentioned, OptionsXpress has Autotrading with over 25 service providers (think P123) on behalf of common clients. It would work roughly like this -

Portolio123 makes an arrangement with a broker for AutoTrading in a format specified by the broker.

You (the client) log onto P123 and specify which portfolios are to be autotraded and with which broker and you give P123 your account number with your broker and absolve P123 of all blame…

You log onto your broker and set up the autotrade arrangement and basically absolve them of all blame for problems and set some parameters such as max $ per trade.

Then your rebalance report gets turned into limit orders which are submitted by P123 to your broker. These are probably day limit orders and there has to be enough cash liquid in your account to handle the trades. If you count on money from sells to fund buys this probably won’t work well. Some days your limit orders wont get executed. Once your order is submitted to your broker by P123 you likely can’t touch or modify it.

Not real sophisticated but it would likely work something like that.

Paul

39

These guys seem to specialise in providing autotrading solutions.
Marco, could you check whether they could autotrade our weekly rebalance?

http://www.strategyrunner.com/Content/services.php

Thanks,
Manuel

40

Another issue is duplicate tickers. I currently run three P123 portfolios of 10 stocks each. Since these portfolios have about 50% monthly turnover, I usually have 15 stocks on buy list – but usually 3 or 4 are duplicates of stocks already held in one of the other portfolios.

Right now, manually, I exclude the duplicates for one portfolio had have P123 generate replacements.

For autotrading to work for me, P123 would need to have some sort double checking to make sure new recommendations for one portfolio were not already held in another portfolio. Ideally a user could specify which portfolios need to be checked. That way some portfolios could be excluded, namely tracking or paper trading portfolios used for forward testing research.

Sound complex. Is it doable in P123?