February 22, 2019
RE: EPIC Crude Oil Algorithm Machine Trading Software Advisory Specific to Trade Frequency Protocol “Throttle” and IDENT Program Description.
We are now near two months of running the machine trading software for crude oil futures contracts (CL).
During the testing phase, which will continue for some time as we adjust code instructions, the execution of trades by the program is “throttled”. Meaning specifically that the frequency of trade was specifically limited to the highest and then was adjusted to a higher win probability threshold.
The result of the initial testing achieved near 100% win side trade accuracy, but less than optimum trade frequency. Increased frequency may (will in our estimation) return a higher ROI – assuming the win rate percentage achieved is high enough. This of course is a complicated calculation within the code that reflects the win side average per trade return vs. loss side average per trade. In short, the loss side is programmed to be less (limited by way of higher frequency executions – tight stop triggers) and when trade is on win side the trade profit is increased via trade size that is progressively trimmed as the trade is in progress. Refer to private Discord oil trade chat server for real-time discussion between developers and traders for more detail.
An article is available at this link that displays some of (actionable by a human trader executing trades manually) the oil machine trading results, much of which was throttled considerably and much of which had human intervention – in other words, had the software been released to execute totally autonomous the returns would have been considerably higher – but we are testing. The highlighted trades returned a 63% increase on the “large account” test for the one month duration. This achievement was specifically to the alerted trades, not the higher frequency machine trades.
The “alerted trades” meaning that which could be considered actionable alerts to our subscribers. The machine software executed many times more trades but our current alert system platform (Twitter private member feed, Discord private chat server, Oil trading room live broadcast) cannot for the most part distribute alerts fast enough for the higher frequency trades to be considered actionable by a human executing trades manually (a trader digital platform is on the team WIP to remedy this). In consideration also is that the higher frequency trade protocols could easily be reverse engineered to expose the proprietary protocols under our IDENT program – this remains a discussion point internally and how the higher frequency trades will be shared is in question (more on that at a later date).
The “throttle” was initially set to approximately 20 x and over the course of fifty days progressively lowered to function near 10 x with less and less human intervention along the way. 20 x for example would result in twenty times less trade frequency than would otherwise be if the software was not “throttled” at all.
Today (Feb 22 at 2:11 AM EST) the code was adjusted considerably to be “throttled” to be less than 10x and will be lowered progressively over the next 7 trade days. The win rate vs. return as it would be calculated over a month is the achievement bar (goal) in focus. More on this objective and other clarification in near future updates.
Market condition will also result in variance of execution frequency as will holiday weeks specific to the model(s) divergence.
The main takeaway: In to next week the frequency of trade will be considerably higher with an objective being to find the most optimum throttle setting to achieve the highest return. The win rate is expected to near 80% and not near 100% and the return on equity on a monthly basis to increase considerably.
The 63% monthly return (monthly return in this instance meaning account equity size increase as it relates to alerted trades only) is a favorable start, however, our team believes 100% + return per month is consistently attainable (on average over a year) and in a perfect machine executed world 300 – 500% being optimally possible. For now our objectives are to achieve consistent wins at higher than 80% with a frequency of about 60 to 120 trades per month with a return averaging 100% per month (the bar).
The IDENT program is a protocol specifically to order flow identification of market participants achieved by way of historical pattern recognition of between 20 – 40 entities that we consider largest and approximately 200 entities that we consider important enough to attempt to track. The entities are prioritized in what we describe as an “alpha” order. The IDENT program is in large part the topic of this recent article at this link that describes the influence of machine trade in the crude oil trade market as experienced by our lead trader and is in large part the reason for the “intuitive like” nature of our software protocol.
The IDENT program seeks to enter trade direction with prioritized alpha order flow and exit in the same fashion. It is a proprietary process and the instruction set within the code architecture will in large part remain private.
For more information on how our development has progressed, refer to this link that will immerse you in a series of articles written from first hand perspective of the day to day trading of our lead trader with crude oil futures.