Proposal: Verification of System Performance Using Trade Execution Data
Author: DartboardTrader
Creation Date: 12/24/2013 9:50 AM
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DartboardTrader

#1
Live trade execution reports tied back to a system's signal would build trust that the "forward" test results are confirmed by actual trade execution reports. This builds subscriber trust that a strategy is not providing excess returns based on trading extremely thin markets or illiquid securities.

There is access to both signals being 'staged' from WealthSignals Trader, execution reports via Fidelity, and account position reports. If the proper agreements are in place and subscribers agree to such monitoring, this could happen.

If the execution reports were collected anonymously, and the trade sizes and time of execution were reported for a system, do you as a subscriber and/or system publisher like this idea?

If so, please reply, so interest in this idea can be evaluated.
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Eugene

#2
QUOTE:
There is access to both signals being 'staged' from WealthSignals Trader, execution reports via Fidelity, and account position reports. If the proper agreements are in place and subscribers agree to such monitoring, this could happen.

The WealthSignals Trader tool is powered by backend built and maintained by our company (MS123 LLC). Monitoring Fidelity execution reports and/or sending Fidelity customer data to a 3rd party is extremely unlikely to happen.
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Cone

#3
QUOTE:
based on trading extremely thin markets or illiquid securities
At least for now, due to the symbol list selection of ETFs and large cap stocks, this worry should be rather minimal with the exception of a market crash once or twice a decade.

Nonetheless, ideally it would be nice to have that type of feedback for statistical purposes, while on the other hand after trading a EOD market system for years, it doesn't really seem to be worth the trouble of worrying about slippage whose positive and negative contributions pretty much cancel each other out.
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LenMoz

#4
QUOTE:
If the execution reports were collected anonymously, and the trade sizes and time of execution were reported for a system, do you as a subscriber and/or system publisher like this idea?

If so, please reply, so interest in this idea can be evaluated.

As a Sandbox publisher, IMHO the idea is not viable because:
1. A Subscriber is not necessarily a Fidelity customer.
2. I would expect (and in fact sincerely hope) that no brokerage would allow publishing of trade data to a third party in this fashion, even with Subscriber authorization.

Len
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DartboardTrader

#5
Hi Len,

I suggested Fidelity, since MS123's WealthLab and Fidelity have a close inter-relationship that may be utilized. In general, if WealthSignals could receive feedback from a trusted third party regarding signal execution fills, the potential exists.

There is precedent for #2, for instance. At collective2, the brokerage executions from a system's auto-trade accounts are available on their website. Trade times and sizes are reported.

Another application of this information: a signal publisher may evaluate whether a system's live executions may be using too much of the market's supply/volume.
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Eugene

#6
Hi Len,

Re: #2. Fidelity is very serious about customer data protection, going to great lengths to keep it secret. That's why establishing such feedback to WealthSignals does not seem possible.
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LenMoz

#7
DartBoard Trader, Re:
QUOTE:
There is precedent for #2, for instance. At collective2

I looked at that site after your post. I had not heard of collective2. Allowing a third party to make trades on my behalf introduces a lot of risk, not the least of which is revealing account credentials to the third party. I'd need to have a lot of faith in the diligence of the Publisher as well. (He'd have to be my wealthy brother.) Also, I did not see any broker I recognized, though I am limited to trading U.S. stocks. Too many red flags for me. Bottom line - Except for the limited symbol list, I'm quite satisfied with the quasi trading as it exists now.

Eugene, Re:
QUOTE:
That's why establishing such feedback to WealthSignals does not seem possible.

I agree and expect no less.

Probably off topic, but, outside of these forums, I had suggested the following. Rather than push orders to the broker, requiring the broker's credentials be revealed to a third party, give the broker the Subscriber's WLS credentials. Having those credentials, the broker could design a "trade-assist screen", populated from the Subscriber's alerts. Subscriber could select an alert to pre-populate a trade screen. The Subscriber would pull the trigger on placing the order, clearly making them aware of the trade and the responsible party. That's about as far as I would take automation of WLS trading.

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Cone

#8
@LenMoz - That "trade-assist screen" already exists in Wealth-Lab. Subscribers can download their signals to the WealthSignals Trader tool in Wealth-Lab. Like alerts from any other tool, they can be sent to the Quotes tool for triggering or directly to the Orders tool for placement. It works quite nicely!

Just click Tools > WealthSignals Trader and strike F1 for the User Guide.
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LenMoz

#9
QUOTE:
"trade-assist screen" already exists in Wealth-Lab.

I knew that, but found it a curious feature. It's a Subscriber solution embedded in the complex Publisher tool. It solves the problem for only a very few, because it introduces the constraint that a Subscriber be a WL user (and therefore a 120 trade/year Fidelity customer), substantially reducing the potential Subscriber population, IMHO.

Is WLS not targeted beyond that small(?) group? This leads to the bigger question. Just who is the target Subscriber audience?

Final thought: The "trade-assist screen" might work better as a stand-alone build aimed specifically at the Fidelity Subscriber. Could leverage the WealthSignals Extension code (thinking a Subscriber wrapper for WealthLab.Visualizers.MS123.WealthSignals.dll).


Len

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Eugene

#10
QUOTE:
it introduces the constraint that a Subscriber be a WL user (and therefore a 120 trade/year Fidelity customer), substantially reducing the potential Subscriber population, IMHO.

Add here the population of Developer customers around the world.