Trading for living with automated trading

[zen4x]

Hello guys I wanted to share with you a couple of thoughts I got about a decent portfolio of EAs to trade full time and realize a return per month to live off.
When I started nearly two years ago to trade I had in my mind to develop a bit of time to go back to school to gain a qualification, but I had a big time problem because I did not have money to stay at home and that could have been impossible to try to do University when you work 50 hours a week.
After nearly two years, I believe of very hard work, I am a little bit more concerned than before since I knew that was a very difficult road to take (I needed to be brave), but at the actual stage I realize that trading is absorbing all my energy and time.
In the recent months I started to do some programming in order to possibly creates few EAs to monitor with strategies that I could trade manually as well in order to build a portfolio of robots that could help me since I still have to work, but with the awareness that your strategy even mechanically works and with some discretion you can even do better.
So far the main concerns are:

1 - Few proved strategy to automate
2 - An estimation of much capital I may need based on a possible return
Option 3 the nasty
3 - The chance that I am wrong and it's impossible based on your experience LOL

I hope that the post can be a useful resource to share ideas and opinions. I posted here because many people do not believe in EAs, but we do all trade and do some code, we do know that we some maintenance it can happen, in other words I did not ask somewhere else since people talk for the sake of talking sometime and say what they heard from their teachers/gurus.

[garyfritz]

At the start of this year, I made a firm and public goal that this year, 2012, I would replace my consulting income with trading. I had a set of 3 different and totally unrelated strategies and I figured that portfolio would get me started.

I started in February and got off to a great start -- everything was working just like it was supposed to, and I was up 20% towards the end of the month. Then ALL THREE strategies went south within 2 weeks of each other, and I gave back my 20%.

Since then I've redesigned my main strategy a bit and it's up 10% in the last 2 months. The other two strategies have not really recovered so I'm still working on rebuilding my basket of strategies.

It's not easy to do this, whether you do it with EAs or manual techniques. (One of my 3 strategies was a manual discretionary approach. I'm learning it from the developer, who's had consistent 60-70% returns for the last 3 years, and *HE'S* been in a steady drawdown for 3 months.)

One thing I've learned over the years is that you can count on things working worse than you expected. You need to plan for that -- plan for lower returns than you expected, plan for 3-6 month drawdown periods, that kind of thing. If you need $3k/mo and you think you're going to make it with 15%/mo returns on your $20k account, you're in trouble. For one thing, 15%/mo is a pretty aggressive goal. But even if you CAN make 15%/mo, it's not going to happen consistently. You need a LOT of extra funds to carry you through drawdowns and tough periods. If you thought you could do 15%/mo to get your $3k/mo, then I'd say you need a minimum of $40-50k in your account. $100k would be a lot better. That way even if you "only" manage to make 10%/mo, you're still growing your account. If you go into a 6-month drawdown, you can draw $18k living expenses off your account and still not be busted.

It's do-able. I've done it in the past. It's NOT easy, especially not to do it consistently for the long term.

[zen4x]

Hi Gary thank you for your view and experience. My target was to live with a 5-7%, because I realized at a certain point would not have been easy to make money any single month.
The problem is that drawdown periods might be quite long and It seems that I cannot withdraw any money from the account. To sort out this problem I should try to pay my wage every 3-6 months or to leave compounding helps the account to grow quicker.
I am wondering if somebody else in the forum can share with us other points like, business plan, budget and recovery plan also

[Freedom787]

I'm working on the same thing. My big goal is to have 4-5 strategies profiting off different market aspects to hopefully eliminate one strategy's drawdown with another strategy's profit. Idealistic, but that's the idea. My goal is to have some strategies making money so that if one goes out of profit, I can sit down with a level head and really evaluate if it's just not profitable, needs additional work, or is going through an expected drawdown.

I think people that are trying to retire with $20-50k are putting themselves into a position of a lot of stress. The biggest reason I don't have a larger account today, is I jumped into "retirement" with a $60k account. Although I pulled $14,000 in a single month once, the stress of knowing my account had to grow in order to both live and make more money in the future, killed my trading. I began making impulsive decisions to make up for losses and ran EA's too aggressively. I ended up losing $1,000-$2,000/month for 5-6 months straight and realized that I need enough money in the bank to not be dependent on the trading money. I became alot happier and more level headed without the pressure.

Just my 2 cents, hope it helps.

[SteveHopwood]

I think people that are trying to retire with $20-50k are putting themselves into a position of a lot of stress.

Dead right. However small or large the account, nobody should trade with funds they cannot afford to lose.

Imagine mortgaging the house to fund a trading account that you then blew? And do not think, "But I never will" because if you are a newbie trader, then you will. It is a very rare Forex trader who has not blown several accounts. I can think of five that I have demolished - and am still recovering from the early ones where I borrowed money to fund the accounts.

Trading Forex can be lethally dangerous to your financial health. This is true whether you take any notice of me or not.

[macman]

I'm working on the same thing. My big goal is to have 4-5 strategies profiting off different market aspects to hopefully eliminate one strategy's drawdown with another strategy's profit. Idealistic, but that's the idea. My goal is to have some strategies making money so that if one goes out of profit, I can sit down with a level head and really evaluate if it's just not profitable, needs additional work, or is going through an expected drawdown.

Nice idea, but it is a pipe dream IMHO.

If major banks with almost unlimited resources can't make a fully automated system work, what chance does a retail trader have with no access to interbank information, using buggy software on a non-dedicated Internet connection?

The HFT 'black box' trading boys spend millions setting up locations as close to exchanges as possible to gain fractions of seconds advantages and nobody is quite sure if they make consistent profits.

At best an EA is a not very intelligent helper, who can mind the shop while the trader is out, asleep etc. At the end of the day, if you don't understand the market you are trying to trade you will go under - just a question of 'When'.

So, please heed Steve's warning & don't get into borrowed money as I have heard some horror stories of guys in real financial holes, desperate for a way out.

Be careful out there ..... :!:

[Nufty]

There is a lot in this topic, so firstly I will say I do trade for a living with EAs.

Simple wasnt it... next topic.

OK, its not that simple. I have developed these EAs myself, not downloaded something off the net, and thought it was the panacea to my income woes. The development, testing, and live trading of an EA can take years. I have one which isnt ready for testing and it has been with the coders for almost 8 months!!

I trade 6 EAs which continue to cost $$$ to develop and maintain. Funnily enough, this is how I arrived in this forum. I wanted to learn the code which costs me so much money to make changes too. (I am struggling with it at the moment - but have promised myself I will get back to it but thats a different story!)

Back to the topic - I have earnt a living from trading FX for a while now. I started by trading my own money as a hobby, then trading family and friends money when they saw my results.

This is where I began to see an income from trading!!

I am not sure if anyone else here trades other peoples money, but if they do, they may find it a nice income stream. I set up an IB arrangement at a broker, added a pip to the spread and found a nice pay packet each week (Ashamedly - if I made money for them or not!!). Yes adding a PIP to the spread reduces the return to the account owner, but I tell them what I am doing and never charge "performance" fees. Everyone is comfortable with the arrangement!

This IB commission was the start of my work from home life. This reduced the pressure on my own trading to seek returns that was outside my normal risk appetite. Small Disclaimer: I have been in financial services my whole career, so I was already licensed (ASIC) to trade and advise clients in FX, which made it easy for me to establish the IB arrangement.

I am Australian and we have some strict rules on these types of things, but I do know of a well known Broker who will allow a family and friends IB facility for up to 15 accounts, without being licensed at all!

When I started I wanted the massive gains - 100% a month, week day! But found out soon enough this is a pipe dream. Yes it can be done - but is it repeatable? Not in the long term.

I now have my EAs working on different brokers (to reduce liquidity risks) and working different time frames, different pairs and different entries for diversification. I have servers in the same data centers as the brokers, run Fiber Internet and have UPSs on all trading computers.

And I seek to return a measly 1 - 2% a month!!

This relatively small goal (in the FX world at least) means I have a very small risk per trade, and by making a lot of small trades across a large equity account, gets me my return week in week out.

It has taken many years to get me here, I have learnt a lot from losing and risking a lot, and one of the things I recommend any trader gets to know when trading EAs is to learn how to turn it OFF. EAs cant predict tsunamis or earthquakes, and they have no idea when NFP day is. We can intervene with the press of a button.

So, from my point of view at least, yes you can make a living from trading EAs, if you spend the time to develop them, understand them, and use them with as little risk as possible. I wouldnt put my families welfare at risk on a downloaded free (or commercial) bot. Just my opinion!

Second disclaimer: I manually trade as well - But I seek a lot more than the 1-2% this way!!

Good luck - its a fun journey, shame it takes so long.

Nufty

[Jemook]

Hey Nufty if you've been trading profitably for a while now you should get in touch with me about trading company capital. Good to hear you are licensed too and are doing it the right way. Can also help you out with IB or managed investment scheme to get more clients.

Pm me if you are interested and this applies to any profitable traders.

Regards,
Jeremy

[Nufty]

Hey Nufty if you've been trading profitably for a while now you should get in touch with me about trading company capital. Good to hear you are licensed too and are doing it the right way. Can also help you out with IB or managed investment scheme to get more clients.

Pm me if you are interested and this applies to any profitable traders.

Regards,
Jeremy

Hi Jem

Just for a little intrigue - My company has used Global Prime in the past

We have our own brokerage platform and two difference liquidity sources now - one in London and one in Asia.

Thanks for the offer Jem, but I am not here to promote my business - I am here to learn to code... which I am really sucking at at them moment.



Nufty