Mar 27, 2008

StockTickr Interview Reveals How We Use Automated Trading

I’m sliding under the table to you some excerpts from a recent interview that our Director of Trader Education, Jamie Hodge, gave to our good friend Dave Mabe of StockTickr. You’ll understand after reading the entire interview how to win against today’s market that’s eliminated many of the information advantages traders used to have and how to trade where the greatest odds of winning exist – below is a slice of the interview.

Reprinted with permission:

Q: What single lesson did you learn along the way that has helped you the most in your trading?

Never become complacent – especially when you’ve been “gimmick trading” all of your career. I refer to any trading practice that can become extinct from a rule change or system replacement as gimmick. The prime example was SOES (Small Order Execution System). Once the SOES phenomenon started taking root, the big boys were already laying plans to do away with it and replace it with a “better” system. One that would allow more shares and faster executions, one that would put the advantage back into their hands. They succeeded in ’01 when they replaced it with the supermontage, and thus SOES became relegated to the history books.

The gimmicks were fun, but I feel that with my current style, there really isn’t anything that could impact it adversely (barring me breaking all of the rules and/or the market just sitting there). In other words, as soon as I was hitting my stride with one of my old styles, then it would end and you’d have to start all over with something different. What I’m doing now has longevity, and so over time, as I improve I should really be able to achieve some nice velocity.

Q: What’s your exit strategy for winning and losing trades?

Anything that I trade these days is generated from alerts fabricated thru Trade-Ideas with the use of The Odds Maker. Not to say that I won’t trade anything else, but I’d say 95% of my signals originate from the TI engine. Most of my hold times are short, my typical hold time is probably 20 minutes. As far as exit strategy it’s pretty simple, once I’m in a position, I stay in it until it’s time period has expired or I get stopped out. If a poiion is approaching its time limit and it’s still moving for me, I’ll tell the Bot (Trade-Ideas Automated Trading System available through select brokers like Assent, TD AMERITRADE, and optionsXpress) to ignore the exit signal and then manually adjust my stop.

In addition to StockTickr’s main service as an online trading plan journal and trader networking site, Dave’s very popular interview series lets you peek over the shoulder of some very successful and well-known traders to see their daily routine in detail. He’s managed to land quite the A-list of interviews with some special people indeed. A major ‘get’ for him was certainly Dan Mirkin, our own Senior Managing Partner.

Want to read the rest of the interview that asks such questions as, How do you recommend established discretionary traders get their feet wet in automated trading? How many strategies do you have and how many do you deploy on a given trading day? How many automated strategies are you comfortable trading simultaneously??

Be sure to visit StockTickr and sign up for his interview RSS feed or make the site a regular visit in your internet travels.