Trade Ideas Blog

Algorithmic Trade Selection- TI “Black Box” system

Feb 21, 2005

UPDATE: All inquiries into our ATS Black Box trading system can begin by visiting our partner, ATrade Investment Technologies LLC:

We are currently in the beta testing phase of our ATS (Algorithmic Trade Selection) Black Box trading system. What is a Black Box trading system and what is Algorithmic Trade Selection?

When professional traders make trade decisions during the day they form opinions as to what is a good Long Entry, Short Entry, and corresponding Exit Signals based on their understanding of the current trading day and previous trading experiences. Using their knowledge and tools they quickly compare today’s activity to previous experiences and make quick, appropriate decisions. In a Black Box system a computer is tasked with the same objective: make educated guesses on what is a good Long Entry, Short Entry, and corresponing Exit Signal. A system leverages its ability to evaluate many factors at the same time, compare them to one another, and do so without emotion.

As part of our human nature we understand that sometimes even the simplest rules are hard to follow: “Cut your losers and let your winners run”. It sounds simple yet EGO can make you do quite the opposite. Here’s another one: “Do as I say, not as I do.”

Our solution to this problem is to task a computer with the decision making problem by giving it certain rules (Algorithms) and a strict discipline to follow. The system contains no EGO, avoids illogical heuristics and simply follows the rules. So far the results have been very encouraging. Here is a link with more details about this new service. We continue to tinker with the system and its deployment including, for instance, what is the best market environment to make the most of the system’s signals? How good have the results been? Read on…