Trainee Trader » Misc

Simulated Random Walk in MATLAB

Mark — Tue, 27 Sep 2011 09:11:38 +0000

Put in simple terms, a Random Walk basically involves taking successive random steps and tracing the trajectory. I adapted the example from part one of Wilmott on Quantitative Finance and wrote a quick MATLAB script to simulate a simple random walk. Basically flip a coin if it is heads multiply the equity seed by 1.01 and if its tails multiply by 0.99.

Results

The graphs below show succesive runs of the script. I simulated 10,000 coin tosses in each test.

Sim one: You flipped 5069 heads & 4931 tails

Sim Two: You flipped 4946 heads & 5054 tails

Sim Three: You flipped 5026 heads & 4974 tails

Sim Four: You flipped 5042 heads & 4958 tails

MATLAB Code

Writing the code in MATLAB is very straightforward I wrote the code in less then five minutes so it is a bit rough around the edges. I probably could refactor it but it does the job.

% Simple Simulated Random Walk Adapted
% from part 1 Paul Wilmott on Quant Fin

% create matrix with random int either 1 or 2
randMat = randi(2,10000,1);
randEquity = [1:10000];

headCount = 0;
tailCount = 0;
equitySeed = 100.00;

for i=1:10000
    if randMat(i)==1
        % we flipped a heads
        headCount = headCount + 1;
        equitySeed = 1.01 * equitySeed;
        randEquity(i) = equitySeed;
    else
        % must have flipped tails
        tailCount = tailCount + 1;
        equitySeed = 0.99 * equitySeed;
        randEquity(i) = equitySeed;
    end
end

fprintf('You flipped %i heads & %i tails\n', headCount, tailCount);
plot(randEquity);
title('\bf \fontname{Arial} \fontsize{16}Simulated Random Walk');
xlabel('\bf \fontname{Arial} \fontsize{12}Number of Coin Tosses');
ylabel('\bf \fontname{Arial} \fontsize{12}Price in ($)');

% clean-up
clear equitySeed headCount tailCount randMat i;

Back at My Trading Desk Ready for Action

Mark — Fri, 23 Sep 2011 05:49:41 +0000

I am coming back after three months fully refreshed and ready to take advantage of some crazy market conditions. Thanks for all the emails and messages. I am slowley catching up only 3k more emails to read 1000 comments to go through Akismet prevented 80,000 spam message from hitting the blog. We also have a shiny new HTML5 theme that makes the site much easier to read. In the upcoming posts I will document my transition MetaTrader5 and have a look at MQL5.

eSignal 11 Creating your Own Watch List & Ordering by Sector

Mark — Thu, 03 Feb 2011 02:02:20 +0000

eSignal 11 is the newest cab of the rank from Interactive Data, it is a complete rewrite of the famous eSignal software. I will write a full review in an upcoming article. You can read my review of the older version of eSignal on demand, back in October 2009. As I work with a lot of financial data I like to keep things organized and my workflow as simple as possible. With eSignal data acquisition, testing and analysis it couldn’t be more simple.

Getting The Symbol List’s For ASX Listed Companies

The first step in the process is to download the symbol lists from the ASX website. The ASX listed companies list is updated daily at 12Am. The easiest way to get the data is to download the CSV file, then we can work with it in Excel. As you can see in the image below there are three columns of data: Company Name, ASX Code and GICS Industry Group.

If you are unfamiliar with the GCIS or Global Industry Classification Standard you can read up on it here. Basically it is just the industry group assigned to a specific company by Standard and Poor’s.

Converting and Sorting the Symbol List

eSignal requires the symbol code and then an exchange code to be added on the end. So for example BHP in eSignal would have the code BHP-ASX. There is over 2000 companies that we wish to change the code for so we need to automate the process. In Excel this can be done with a simple formula and a fill. What we want to do is take the text string in column B of our spreed-sheet and add the text string “-ASX” to the end of the stock code. To do this we use the CONCATENATE function, this function takes n text strings and adds them together to form a new string.

As you can see from the above image in cell D1 we simply type: =CONCATENATE(B4, “-ASX”) and we fill down for the entire range and we now have our eSignal symbols ready for export. In order to export our symbol list by GCIS sector we need to custom sort the data first. Simply go to Sort -> Custom Sort and then sort by GCIS Industry Group as shown below.

Creating a New Page in eSignal 11 and Adding a Watch List

The first step is to create a new page in eSignal, to do this go to eSignal menu -> New Page or CTRL + SHIFT + N.

In the New Window template select Watch List. This will add a blank watch list to the page. After the Watch List has been added it is a good idea to save the page. You can do this be right clicking on the page tab and selecting save.

For each GCIS group I will create a new list. To do this simply click on the gear icon to the right of the blank symbol list, now rename the list to the appropriate GCIS group.

Copy and paste the group symbols from the Excel spreed-sheet, save the list rinse and repeat. The image below shows my ASX sorted GCIS watch lists.

In total there are 21 separate lists with 2227 symbols.

Numerical Computing Environments for Traders

Mark — Mon, 10 Jan 2011 04:52:07 +0000

Microsoft Excel is an excellent tool and you will be able to accomplish most of your work in it. However there will come a time when you need to test a complex model, run a large simulation or work with a huge data set that would grind Excel to a halt.

Numerical Computing Environments

When all is said and done there are 5 main options that each have a large community base. You should try out each environment to see which works best for you and is most cost effective. I have found a happy medium using SciPy and Matlab. I will however be testing out SciLab over the next few weeks.

Matlab

Matlab is the “Big Daddy” or the King of Numerical computing environments. I don’t think I really need to add much more. It does pretty much everything and you can extend it with .m code, however you need deep pockets.

Scilab

Scilab provides features similar to Matlab and has a built-in Matlab translator. Scilab comes in a complete package and is easy to setup and run. Scilab also has a code editor and allows for C++ code integration.

Octave

Octave is essentially an open source Matlab clone. You will have to port your code between Matlab and octave as they have subtle differences and Octave has no IDE.

SciPy

SciPy + numpy + matplotlib provides modules for plotting, large datasets, statistics, optimisation, numerical integration, linear algebra, Fourier transforms, signal processing, image processing, ODE solvers, special functions and of course all the power and simplicity of the python. This is the option I have gone with.

R

R is a software environment for statistical computing and graphics. R is a very powerful yet arcane programming language. I would only recommend for people comfortable programming. I have it on the computer but have as yet not put in the time to learn R.

The Beauty of Simplicity

Mark — Fri, 07 Jan 2011 02:13:13 +0000

When I made the decision to continue with Trainee Trader I knew I had to update the theme. The old theme was a professionally designed theme that I wasn’t happy with at all. I decided that I wanted to be able to easily customize the theme without having to interface with the WordPress API. After some research I narrowed my choice down to Headway or Thesis theme.

Why I Went with Headway Theme

Headway offers extreme customisation and yet it is very simple for people to use (even non-code monkeys). Headway allows you to design visually via a visual editor and gives you a lot of flexibility while keeping things simple. Headway also has professional level SEO tools built right into the theme design. At the moment I am finalising the exact layout I want for the website and once I have sorted that out offline I simply upload the skin and instant customisation. Right now I am running the pretty much default theme as you can see below. It is clean easy to read and navigate and a great placeholder while I finalise Trainee Trader 3.0.

The image below shows Headways in post SEO options and a mockup of how google will display the search engine listing.

Simplify Your Workflow

As a programmer I am always looking for the simplest solution for a problem. I am sure you have heard this Einstein quote a million times but I have to include it:

“Everything should be made as simple as possible, but no simpler.”

I am really trying to apply this principle to my everyday workflow. I have found since I switched to Mac OS X operating system that getting things done on the computer has been a lot more simple. I still run Windows 7 however I have installed that on my bootcamp portion and only use it if I absolutely have to.

Two Software Applications Everybody Should Use

Evernote and Dropbox allow me to store and sync data with multiple computers and handheld devices. Dropbox allows for the storage and syncing between multiple devices and backing up online. The image below shows the devices I have syncing data so I never find myself in a situation where I am transfer files via USB.Best Of all DropBox gives you 2 gig of storage space free.

Evernote allows you to take notes pictures and recordings clip websites and keeps them organised for you online and allows you to seamless retrieve them. The free accounts are somewhat limited as the only allow for 60mb transfer. However if you use this simply for text notes with the occasional drawing then you shouldn’t have an issue.

Back by Popular Demand-2011 The Return of Trainee Trader

Mark — Thu, 06 Jan 2011 11:07:00 +0000

We are now six days into the New Year and I have finalized my plans for the year ahead. This year I am dedicating myself full time to trade system design, testing and implementation. I will probably be doing a bit of consulting work to on the side. This year I need a razor sharp focus to ensure that I achieve all of my goals.

Reflections on 2010

2010 was a less then memorable year for me, as most of you know my health has been the thorn in my side. I completed my graduate diploma in Financial Planning so I can now legally give personal financial advice. However anything I write on TraineeTrader.com is not intended to be taken as advice and is intended for entertainment and educational purposes only. Most of my year has been spent in and out of hospital and at doctor’s appointments. I did manage to do some iPhone development and started to do some OS X system development, which was fun. I also did some work with 3d graphics pipeline and Houdini.

2011 The Year Ahead

This year I will be doing a lot of trade system research and design. I don’t intend to publish my trading method, however I will write about the process. I will be going back to basics and starting from scratch, which will give readers a chance to follow along and develop there own trading system. I will also post more non-trading and technical articles.

Fat Fingers and Fat Traders

This year it is also time to shed some excess kilos and get back in shape. In sedentary white-collar jobs it is essential to have an exercise or training plan. At the moment I am reading the four-hour body by Tim Ferris and it has been quite an interesting read so far.

Goals

$50k after tax income from trading
$75-$100k after tax income from consulting and other business endeavours.
Be rolled for $5-$10 2-7 Triple Draw by the end of the year.
Change my body composition and lose 10kg of fat or 22 pounds for my non –metric system friends.

These goals will not be a walk in the park but with some hard work and perseverance I will get there.

Follow me on this journey.

MetaTrader Indicator Design: Spread & Magnified Price

Mark — Mon, 27 Sep 2010 07:04:08 +0000

I have written a very simple indicator for MetaTrader that shows a magnified version of the current price. For this indicator I wanted to show the fractional pip value with less emphasis.

I also wanted to be able to display the current spread, so it is easily viewable from the chart window.

I have made the following varibles modifible when attaching the indicator to the chart:
fontColor – This is the colour of the price display if bidAsk=”False”.
spreadColor- This is the colour of the spread display.
fontSize – This is the size of the bid and spread prices.
corner- This controls which corner you want your price and spread detail displayed in.
bidAskColor- This is set to true by default, if you wish to display solid colour only set to false.

Below is a screenshot of SpreadPriceInd.mq4 in action:

The source code for the indicator is shown below:

//+------------------------------------------------------------------+
//|                                               SpreadPriceInd.mq4 |
//|                                  Copyright © 2010, TraineeTrader |
//|                                     http://www.traineetrader.com |
//+------------------------------------------------------------------+
#property copyright "Copyright © 2010, TraineeTrader"
#property link      "http://www.traineetrader.com"

#property indicator_chart_window
   // usr mod vars
   extern color     fontColor = Yellow;
   extern color     spreadColor = Blue;
   extern int       fontSize=24;
   extern string    font="Arial";
   extern int       corner=1;
   extern int       diffDig = 10;
   extern bool      bidAskColor = True;

   double           prevPrice; // easier if global

int init()
  {
   return(0);
  }

int deinit()
  {
   //kill chart objects
   ObjectDelete("nonFracPrice");
   ObjectDelete("fracPrice");
   ObjectDelete("marketSpread");
   return(0);
  }

int start()
  {
   int xOffset = fontSize - 8; // for fractional pip offset
   string priceBase; 

   if (bidAskColor == True)
   // shown movements in price by color change
   {
    if (Bid > prevPrice){ fontColor = LawnGreen; }
    else{ fontColor = Red; }
    prevPrice = Bid;
   }

   // Usually 5 or 3
   priceBase = DoubleToStr(Bid, Digits);
   int SLength = StringLen(priceBase);

   // Create chart objects
   ObjectCreate("nonFracPrice", OBJ_LABEL, 0, 0, 0);
   ObjectSetText("nonFracPrice", StringSubstr(priceBase, 0, SLength-1),
fontSize, font, fontColor);
   ObjectSet("nonFracPrice", OBJPROP_CORNER, corner);
   ObjectSet("nonFracPrice", OBJPROP_XDISTANCE, xOffset);
   ObjectSet("nonFracPrice", OBJPROP_YDISTANCE, 1);

   ObjectCreate("fracPrice", OBJ_LABEL, 0, 0, 0);
   ObjectSetText("fracPrice", StringSubstr(priceBase, SLength-1, 1),
 fontSize-diffDig, font, fontColor);
   ObjectSet("fracPrice", OBJPROP_CORNER, corner);
   ObjectSet("fracPrice", OBJPROP_XDISTANCE, 1);
   ObjectSet("fracPrice", OBJPROP_YDISTANCE, 1);

   ObjectCreate("marketSpread", OBJ_LABEL, 0, 0, 0);
   ObjectSetText("marketSpread", DoubleToStr(MarketInfo(Symbol(),
MODE_SPREAD)/10,2),fontSize, font, spreadColor);
   ObjectSet("marketSpread", OBJPROP_CORNER, corner);
   ObjectSet("marketSpread", OBJPROP_XDISTANCE, 1);
   ObjectSet("marketSpread", OBJPROP_YDISTANCE, 40);
   return(0);
  }

Has Timothy Sykes Turned to Scientology for His Stock Picks?

Mark — Tue, 16 Mar 2010 05:32:43 +0000

It has been a while since I have visted Timothy Sykes website and I was a bit shocked when I did a google search and the following image results came up:

As you can see the image on the very end looks to be Timothy Sykes addressing a congregation of Scientologists. After closer inspection however it is clear to see it is a Photoshop fake. So if Timothy Sykes does not have the divine power of Alien life-forms to pick stocks for him how does he do it?

Timothy Sykes The King of Pump & Dump’s

I am not implying that Timothy Sykes promotes these garbage stocks, he merely identifies them. Most of the time he will short these stocks, occasionally he will ride them on the way up. If you want a more in depth statistical analysis of Tim’s trades check CXO’s blog a summary of his findings are shown below:

Notable characteristics of the balance of 295 trades are:

74% of the trades are profitable.

On a trade-weighted basis, the average net return per trade is 6.1%.

The standard deviation of trade returns is 13%.

On a dollar-weighted basis (derived from the trade data provided), the average net return per trade is about 4.0%. In other words, large trades tend to be less profitable than small trades.

The arithmetic (geometric) mean monthly net return of the underlying portfolio is 10.5% (10.3%).”

His final summary shown below:

” In summary, evidence from simple tests on available data supports a belief that Timothy Sykes can identify pump-and-dump patterns in real time with economically meaningful consistency, but scalability is multiply constrained such that his subscribers may not be able to mimic his trades reliably. Niche constraints may preclude exploitation by large traders, a large group of small traders and funds.”

I have yet to go over the numbers myself but the conclusion does seem reasonable. In the past I have reviewed:

Overall I was happy with the material presented in these DVD’s however they left me wanting to investigate Tim’s trading tactics more and see if they could be applied to the Australian market. Over the coming weeks I will be watching and taking notes on all of Tim’s new DVD’s and see if I can turn this knowledge into a tradable system. I will be watching the following DVD’s

Shortstocking.
Tim Fundamentals I and II.
Learn level II.
TimTactics.
Best of Livestock.
Read SEC Filings.

It is a lot of material to get through but if the previous DVD’s are anything to go by I am sure they will be entertaining. I will leave my final judgement till I have gone over all the material.

Windows Vista Applications I cant Live without

Mark — Fri, 19 Jun 2009 06:45:11 +0000

After reformatting my hard drive and reinstalling Windows Vista Business Edition I have been left with a clean slate. I am left looking at a blank desktop it is not until I start trying to work on a project that I realise how many third party applications I have come to rely on so in this post I will go through them.

Internet Tools

Firefox (Free) – Open source web browser. Download Firefox.
FlashGet (Free) – Free Download accelerator. Download FlashGet.
COMODO Firewall (Free) – Simple easy to use free firewall. Download COMODO Firewall.
Windows Live Writer (Free) – A excellent free tool to compose blog posts. Download Live Writer.

Trading Tools

Rapid Miner (Free) – Free data mining toolkit. Download Rapid Miner.
QuantLib (Free) – A free finance programming library. Download QuantLib.
Octave (Free) – A free MATLAB implementation. Download Octave.
MetaTrader (Free) – A free FOREX application. Download Metatrader.
Microsoft Visual Studio 2008 Profesional (Commercial) – Programming suite. Visit Site.
Trader XL Pro (Commercial) – An all in one trading solution. Download Trial.
Microsft Excel 2007 (Commercial) – A must have for any trader. Visit Site.

System Tools

NotePad++ (Free) – A free feature packed replacement for notepad. Download Notepad++.
AVG antivirus (Free/Commercial) – Easy to use virus scanning solution. Visit Site.
PDF Creator (Free) – Easily create PDF files from any application. Download PDF Creator.
7-zip (Free) – Open any compressed file you should come across. Download 7-Zip.
Sync Toy (Free) – Backup or sync your files to a storage device. Download Sync Toy.
CCleaner (Free) – Clean and optimize your system. Download CCleaner.
VirtualBox (Free) – Create a sandbox for testing apps on production system. Download VirtualBox.
KeePass (Free) – A simple tool for managing login credentials. Download KeePass.

Image and Video Tools

Paint.Net (Free) – A free Image editing application. Download Paint.Net.
IrfanView (Free) – Open any image file. Download IrfanView.
VLC (Free) – Play any format video file. Download VLC.

Poker Tools

PokerStove (Free) – A free poker equity calculator. Download PokerStove.
PokerHands (Still in Beta Testing Free) – Good draw poker tracking software. Download PokerHands.
PokerProLabs Tools (Commercial) – A suite of useful tools. Visit site.
Hold’em Manager (Commercial) Tracking software for hold’em. Visit site.

Money, Finance, Stock Market Links

Mark — Mon, 30 Jun 2008 23:55:41 +0000

R.I.P Adsense Referral Ads.

Fireworks may be harder to get.

25 essentials for networking success.

North Dakota Oil Rush.

The Financial Wisdom from Fight Club.

3 ideas that are pushing the edge of science.

The good the bad and the ugly of $7 Gas.

The vicious cycle of staying up late.

The problem with Banks.

How to find stocks which make a big move.

Shocker of the day: Intraday price action.

The ratings racket.

Stock market trend analysis.

How big a contribution could oil speculation be making?

Coaching hedge fund and portfolio managers.

Lessons in productivity.