INTERVIEW WITH DANIEL R: DESPITE SOME CHALLENGES, PROFITS FROM ATS TRA
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DISCLAIMER:  Futures trading systems and commodity trading bear a high degree of risk. People can and do lose money.
Hypothetical results have many inherent limitations. Past performance does not guarantee future results. 

 

ACTUAL RESULTS SHOULD BE VIEWED WITH CAUTION, BECAUSE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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#052: INTERVIEW WITH DANIEL R: DESPITE SOME CHALLENGES, PROFITS FROM ATS TRADING ACCORDING TO THE PLAN

Not so long time ago, I brought you an interview with one of my students, Jonas: +14,000 PROFIT IN THE FIRST 74 TRADES.

Today, I would like to bring to you another interview, this time with my student Daniel, who is one of my most enthusiastic students.

 

 

Hi Daniel, can you tell us something about yourself?

 

Greetings to all readers, my name is Daniel, I am 30 years old and I am from Karlovy Vary, Czech Republic. I studied economy in Prague and after university studies, I started working as an investment specialist for the biggest bank in the Czech Republic. Couple years ago, I took the opportunity to work and live in Switzerland and this is where I am until these days. I devote myself to trading practically every day and I relax by mountain hiking.

 

The start of your live trading was in sign of many crucial moments, even though your first quarter was profitable. What happened and how did you eventually end up? What would be the difference without having all those unpleasant “surprises”? Can you also share your equity with us?

 

I trade using a remote server in Chicago, so in the beginning, I had to tune up the running of the server. And when you had to solve these issues remotely, it takes quite some time. Further, it often happened that my strategies switched off by themselves and the biggest issues I had with rejected entry orders. The strategies weren’t closing positions at the end of the day, as they should, but stayed opened for a couple of days with the stop loss deactivated. And when I checked the trading platform, some of my systems with $1,500 stop loss, were in $4,500 open loss and I had to monitor the situation for a couple of next days to close the position manually to minimize the loss. I was really close to the total drawdown for which I was building my portfolio and for a long time I couldn´t estimate if I would have to turn the whole portfolio off and how to solve all these difficulties.

 

Before I started live trading, I made the Monte Carlo Analysis in MSA program and by the end of the quarter it came out that I could be in 10-15% profit. Despite all complications, I ended up in 11% profit. Without all those difficulties, it could have been 15%, as you can see on the equity below.

 

 

What have you taken from all these troubles and errors you have been through, to eliminate similar situations in the future?

 

At first, it is important to analyze the problem, identify the root cause and start working on a solution. If you don’t know what to do, don’t hesitate to ask professionals for help. In the beginning I wanted to solve all issues by myself. After a couple of weeks of experimenting, still being in losses and still having the same issues, I decided to call to TradeStation help line in the USA and after 2 minutes on the phone, the problem was solved and everything was running smoothly. I would also like to thank Tomas for his support and his patience, as during some periods he replied to several my emails per day.

 

To keep myself positively tuned also helps the fact that all complications I have encountered were technical errors, not system errors. I fully trust all my strategies, their logic and the quality of the portfolio I have built.

 

Can you tell us more about your current portfolio? How many markets do you trade, what markets, what timeframes and anything about your systems?

 

So far, I have developed about 20 systems. But due to conservative money management I trade small portfolio of 5 systems on 4 index markets, all of them long biased. The rest of my systems have better net profit to drawdown ratio, but due to higher drawdown, I am waiting for capital raise. I could have better results, but since the beginning I try to follow my rule to maintain minimal risk - that is what I also want to follow later on, when trading will become my main source of income.

 

What are your most interesting findings from the world of automated trading?

 

The possibilities that automated trading can offer are limitless and everyone can find what suits him. I think that it is really important for everyone to project his personality into trading, strengthen his talent and find a way to compensate his weaknesses. On the other side, trading helps me to become a better person in several aspects of my personal life.

 

What do you focus on during the strategy development? What are really important points for you?

 

My entire strategy development stands on the principle that I don’t change or modify any of my strategy candidates. If I have a candidate from design&prototype process that doesn't fit mi criteria, I delete the strategy and start with another candidate from the beginning. You should also focus on the documentation of the whole development process. As long as everything is running smoothly, the documentation doesn’t seem to be that important. But as soon as you encounter the first issues, it is best to return a couple of steps back.

 

What part of automated system trading do you spend the most time with?

 

I used to spend really a lot of time with the documentation, and just recently I have changed the process when I document 75% less information with the same corresponding value. I call it reverse documentation and it is based on the skipping the documentation during the development process. I document only once I know that I have really new, robust system.

 

Today, I spend most of the time on portfolio simulation in Market System Analyzer, which is really a useful tool for Monte Carlo Analysis, correlation and position sizing.

 

Why did you choose automated trading? How do you perceive the psychological aspects of this trading direction?

 

Frankly, in the beginning I thought of myself as of a discretionary trader and since I am not a programmer and I try to spend my free time away from a computer, I was really skeptical about automated trading systems (ATS) and I didn’t take this direction seriously. My big dream, that brought me to trading is a trip around the world on a motorbike. To fulfil this dream, I was looking for possibilities of an independent income. I had a vision that every month, I would spend one week trading, earn some money and keep traveling. I started studying discretionary trading, attended seminars, made a business plan, backtested markets, bought software and I was just one step from starting live trading. And then I read Tomas’s book “Trading without borders” (in Czech language only) and I realized that in that book, he described my goal and that automated trading fits perfectly into my idea of a dream coming true. At the same time I slightly modified my goal to top Tomas in the number of countries visited thanks to income from automated trading :-)

 

Even though the computer trades for me and that during the backtest I thought that I can handle 30% drawdown, I couldn’t be far from the truth. You need to slowly get used to trading and rely on your systems even during the drawdown. Discretionary trading is really psychologically challenging during execution and following the trading plan. On the other side, for ATS traders it is important to be psychically balanced - that allows them the creativity. For example, meditation or a hike to the nature far from modern technologies almost guarantee new ideas.

 

What are your long term goals and what are the next steps you plan in your portfolio?

 

I will to keep my current portfolio without any changes for some time. I want to develop some short biased strategies for index markets that I trade. After that I will implement Market Internals to my existing systems and I want to expand also to non-index markets. In the future I would like to trade Asian markets, but for these I don’t have technical solution developed. I am also in touch with a professional programmer, we will work on automating the whole strategy development and robustness test process.

 

What would you advice to beginners in ATS trading?

 

In the first place, a lot of patience. Don’t try to look for any improvements or shortcuts. The know-how, that Tomas teaches , is already a big shortcut and a great source of original concepts. Don’t hesitate to ask professionals for help, in most of the cases you will save a lot of troubles and money compared to when you would try to solve it by yourself. Once you understand that you are not the trader, but you are ATS developer and the trader is your system, it will help you in getting confidence in your systems even during the drawdown periods and you will not be tempted to “improve” your candidates during the robustness tests, just you can start live trading.

 

The last and the most important advice is - don't be afraid to make mistakes. In the beginning, your mistakes cost you just a fraction of money if you do the same mistake later, as a full time trader. But once you make these mistakes, you will not repeat them again.

 

So to all beginners I wish the best luck, good trades, courage to step out of your comfort zone and don’t forget to make mistakes, lot of them - just be careful not to spend too much money on them.

 

Daniel, thank you for very inspiring interview.

 

Happy trading!

 

Tomas

 

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What others are saying

"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

Andrew Swanscott, BetterSystemTrader.com

"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

Martin Lembak,

Systems Trading Expert,

MFRM, CAIA 

"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

William Galwas, President Of Striker Securities, Inc 

"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

Craig Peters,

semi-advanced trader,

United Kingdom 

"Tom's approach to Automated Trading Strategies design, tests of robustness and portfolio diversification is really unique. He has been a professional trader for many years and the depth of his understanding of Breakout strategies and Market Internals is hard to find elsewhere."

Antonin Fisher,

Hedge Fund Manager,

Czech Republic 

"Tom´s systems and trading approach do really work and can bring good, stable and reasonable returns. I can highly recommend him as a teacher."

David Hruby,

Trader, Czech Republic 

"Tomas is truly an inspiring mentor and great trader with a positive life attitude. He has got very deep understanding of markets, breakout strategies, robustness testing procedures, and Market Internals."

Jan Lesanovsky,

Client, United Kingdom 

"As an experienced trader, I used Tomas´s consultation to get more clarity on best-practise robustness testing procedures, risk management, and portfolio management. He was quickly able to help me refine my current trading and system development approaches, and pointed me to really practical measures that I could implement immediately. I found Tomas to be not only extremely knowledgeable but very helpful and a great teacher. This has given me more confidence in developing robust strategies that work, and I would recommend his mentoring as extremely valuable for any systems trader."

Trevor West,

advanced trader, Australia 

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