More tips on choosing robot settings
Posted: Thu Feb 14, 2013 4:06 pm
In this article I'm going to discuss possible ways to optimize the chances of success using the robot. There are no 'recommended settings' for the robot, because the optimal settings vary depending on the market you are deploying the robots into. I suggest always studying the market briefly first, to help you decide what settings are likely to be optimal and meet your personal outlook on risk. The robot is automated and gives you a speed advantage compared to manual traders, but it still requires a bit of thought to choose the best settings and the best markets.
For example:
1) The first step is probably to select a market that might suit the robot. For example, if you notice that a pre-play football market has been fairly static around a fixed price point and is defintely trading on both sides of the market, with a deep queue at the front prices, then you might become interested.
2) Then look at the size and dymaics of the queue (by queue, I mostly mean the volume of money offered at the front price on each side of the market). Look at the typical size of the queue. This will help you decide what support there will be behind you by the time you reach the front of the queue. You want money to build up behind you, as the money gets matched in front of you. So it is important that the price doesn't get wiped out constantly by strong momentum in one direction.
3) Also try to get a feel for the typical trade size appearing in the last trade column. You want to join a large queue which keeps getting hit by small matches, so that there is time for new money to arrive behind you, as you slowly progress to the front of the queue. The new money helps support you and your ability to scratch.
Imagine that you have spotted a market where there tends to be £2000-5000 at the front prices and the typical last trade is £200. Then you can start to devise appropriate Min Liquidity and Scratch sizes. In this example, you might choose a scratch size of £200-500 and a Min Liquidity of £1000-2000, or whatever you feel comfortable with. Choose bigger numbers for safer operation, or smaller numbers to get more business and take more risk.
You could also consider further extending your robotic trading into more volatile markets if you are willing to change your risk profile. For example in volatile markets that you feel have a strong centre centre of gravity (around a busy price), you might even choose a strategy which involves turning off the scratch feature. In other words, you might decide that the market has strong 'reversion to mean' tendencies which are likely to ensure that the market keeps coming back to the same tight price range where it will match both sides of your original position, rather than running away in one direction.
If using the robot in horse racing (which is usually a volatile noisy market), it might be worth considering trying a strategy that doesn't rely on using a tight stoploss, but instead sends all orders as "Take SP". This might give the market a chance to revert to mean and thus fill your orders pre-play, rather than hitting a stoploss and then bouncing back! There is nothing more annoying than seeing your stoploss being hit during a period of market 'noise'. If the market doesn't revert to mean, then at least you know your positions will be closed at the start of the race for a loss that was not defined by an arbitrary stop loss. It all depends on your appetite for risk.
These are just my suggetions, it is not financial advice!
Good luck and happy trading,
Gavin
For example:
1) The first step is probably to select a market that might suit the robot. For example, if you notice that a pre-play football market has been fairly static around a fixed price point and is defintely trading on both sides of the market, with a deep queue at the front prices, then you might become interested.
2) Then look at the size and dymaics of the queue (by queue, I mostly mean the volume of money offered at the front price on each side of the market). Look at the typical size of the queue. This will help you decide what support there will be behind you by the time you reach the front of the queue. You want money to build up behind you, as the money gets matched in front of you. So it is important that the price doesn't get wiped out constantly by strong momentum in one direction.
3) Also try to get a feel for the typical trade size appearing in the last trade column. You want to join a large queue which keeps getting hit by small matches, so that there is time for new money to arrive behind you, as you slowly progress to the front of the queue. The new money helps support you and your ability to scratch.
Imagine that you have spotted a market where there tends to be £2000-5000 at the front prices and the typical last trade is £200. Then you can start to devise appropriate Min Liquidity and Scratch sizes. In this example, you might choose a scratch size of £200-500 and a Min Liquidity of £1000-2000, or whatever you feel comfortable with. Choose bigger numbers for safer operation, or smaller numbers to get more business and take more risk.
You could also consider further extending your robotic trading into more volatile markets if you are willing to change your risk profile. For example in volatile markets that you feel have a strong centre centre of gravity (around a busy price), you might even choose a strategy which involves turning off the scratch feature. In other words, you might decide that the market has strong 'reversion to mean' tendencies which are likely to ensure that the market keeps coming back to the same tight price range where it will match both sides of your original position, rather than running away in one direction.
If using the robot in horse racing (which is usually a volatile noisy market), it might be worth considering trying a strategy that doesn't rely on using a tight stoploss, but instead sends all orders as "Take SP". This might give the market a chance to revert to mean and thus fill your orders pre-play, rather than hitting a stoploss and then bouncing back! There is nothing more annoying than seeing your stoploss being hit during a period of market 'noise'. If the market doesn't revert to mean, then at least you know your positions will be closed at the start of the race for a loss that was not defined by an arbitrary stop loss. It all depends on your appetite for risk.
These are just my suggetions, it is not financial advice!
Good luck and happy trading,
Gavin