He is the key step to open systematization and short line high frequency trading.

He is the key step to open systematization and short line high frequency trading.

Trading is self-awareness, investing is life changing.

Mende Staal: Director of Investment at Shanghai Jinjiang Investment Management Ltd. He has been involved in quantitative trading for a long time. He started focusing on the futures market in 2008 and developed a variety of trading strategies, eventually forming a multi-strategy, multi-variety, multi-cycle programmatic combination strategy system, pursuing stable returns with low retracement, long-term annual returns with a maximum withdrawal ratio of 4:1. After 2010, annual stable profits at the ten-million level.

• ### Monda Staal is on record saying: Today, I'm going to share a simple piece of information that consists of three parts: the first part is to share some of my understanding of programming; the second part is a brief introduction to high-frequency trading; and the third part is to give you some tips by introducing some of our company's asset types and investment combinations. We see the first part, programmatic trading. I don't know how much you know about programmatic trading, so I'm starting with the simplest part. First, I'm going to ask a question, why do most people trade at a loss? Because statistics show that almost 90% of people in the futures market are at a loss, 80% of people have a life cycle of more than three months, 70% have a life cycle of more than half a year, 60% have a life cycle of more than a year. There are very few outcomes that actually make money in the market. Why do you lose? We do a very simple intraday trading system, we perfected the trading system mentioned above, the previous aspects I mentioned are to determine the direction, cut entry points, stop loss, money management, now do the simplest one, what is the direction?

(Financial curve 1)

We can see that with such a simple trading system, we can see that the index is very good when the stock was just listed in 2009 and 2010 and we can see that with such a simple trading system, we can see that the stock is from April 16th of the year when it started to be listed until the most recent year at the end of 2013, the capital curve 1. This is the trend after the stock was listed on April 16th, which is a downward trend, this is just what we have a simple day trading system, it only started to recover rapidly in the second half of 2013. But I want to ask a question, how much of the profit on the stock is still positive now, I believe most people are negative.

(Funding curve 2) We've made an improvement to the day trading system now, it's too simple, there's no way to adapt to this increasingly complex market situation, that's why we just couldn't stick to it, the long-term profit concept is not to lose too much when you lose, because if we do it with such a simple trading strategy, although it's ultimately profitable, but few people can stick to it, why? Because the mid-retracement is too big, the moment we don't wait for the dawn, we die in the dark.

(Financial curve 3) Optimize the rolling stop to form a curve of money 3, we don't need to say that we have to get a close, many markets are up 80 points in the morning and turn into a loss of 20 points in the afternoon. Then you may not get 80 points, and the result is a stop of 20 points. This is not reasonable, then we join the rolling stop, very simple, that is, we have gained more than 50 points, once we withdraw 40% or 30% I stop.

(Financial data result chart)

Then it's a strategy comparison, the first one is our simplest one, the rate of profit, the number of hands, what is the maximum asset withdrawal? 200,000. The second, adding two even line optimization, the maximum drawback became 160,000, but still large, the hit rate slightly increased, the number of dealers decreased because of partial filtering. Thirdly, the rollback after the addition of the rollback stops is very small, 60,000, at least that's what I've been able to stick with. Its curve smoothness starts to improve, its risk-reward ratio gradually changes from less than 1 to 3, and the maximum rollback value also changes. This is the continuous evolution of the individual strategies in your programming.

(Funding curve 4)

We do a simple trend system, and then we do another trend tracking system with a different starting point, and maybe that one is on the 3-minute line, and we now overlay the 15-minute line and the hourly line, or give us another trend strategy thinking, and put different trend strategies together on the capital curve, and the curve becomes better. Why is that? Because different strategies, although they are all trends, have different starting points, and some strategies are just as long as the trend is just starting, it's going in, it's going in more often, the strategy confirms that it needs to go in, and then we run three strategies at the same time, and if it's a small wave, it's just going to trigger those trend-sensitive trading strategies, and when the market-sensitive trading strategy doesn't trigger the first wave, it's going to be better. We then add a completely different logic, a system of shocks and reversals, and its curve is very good for the capital curve 5. What's the biggest difference? It's the whole 2013 cross-curve stage, which starts to rise, and of course it's not as sloppy as it was earlier, right? It plays a smooth role. It's easy to make money with a trend strategy when the trend is clear here.

(Financial curve 5)

Let's see how it works, it has a reversal strategy, it has a shock strategy, it has a trend strategy with different cycles, it has a capital curve made on the same stock finger, and we can see that it has a profit ratio of 46%, it has a maximum drawdown of more than 138,000, but notice, although it is more than 60,000, but everyone needs to understand how many hands it is? 1, 2, 3, 4, 5, 6, 7, 7 strategies, that is, the maximum position it will reach 7 hands.

(Financial data graph)

The largest one-day profit and loss can reach 120,130,000, with a capital of 1 million, the largest one-day loss is only 34,000. This is a reasonable ratio. We often say trend trading, wave trading should be 3: 1, this is a reasonable ratio. You can see most of the losses, the loss in a day is controlled within 15,000. That is, the maximum withdrawal of most of the day is within 1.5%, which is completely acceptable, and the maximum profit of the day can be 10%. The German philosopher Schopenhauer once said that a person is inevitably going to make the same mistakes in the same time conditions, which is the inferiority of humans. Simply put, there are two points: first, it is very powerful in execution, and second, it is very fast in trading. Let's say first, subjective trading means that we are trading with the market, but also that we are constantly struggling with our own psychological tendencies. The German philosopher Schopenhauer once said that a person is inevitable to make the same mistakes in the same time conditions, which is the inferiority of humans.

There's a graph here that I'm just going to say, this is a graph of the overall trend after the stock goes public. You can see that the volatility is not constantly converging, and that's why the simple trend trading system makes money when the volatility is high, makes money when the trend is clear, and loses constantly when the volatility is high, because the reverse is the case, because the reverse is the case, so the simple approach is no longer able to adapt to the market. Then you not only have to overlay different forms of trend trading systems, which fluctuate in different cycles, but also have to overlay the volatility and inversion strategies. Programmatization is not as simple as I just said it should be. In fact, it has a lot of work to do, why? Because there are more and more programmatic bottlenecks. In several respects, the first is that there are too few trends, so the market structure is more and more complex, the composition of investors is more and more complex, the institutional investors are more and more, and the trend will become less and less broken. We will use a number of methods, through the symmetry of time, trends and some features of the evolution of the oscillation of the nodes to judge whether the current volatility is to evolve from one volatility to another. But one thing is clear, once a volatility is formed, it is consistent, and after the formation of one volatility it will continue for several days until something special breaks this volatility, it will move into another.

The strengthening and unification of many varieties, have you noticed a characteristic, when the market pulls all the main varieties of contracts into one interface, at a glance there is red and green, then today's market is difficult to form one-sided, that is, the falling varieties probably won't fall anywhere, and the rising varieties probably won't go anywhere. Because different varieties its strength is fragmented, at this time it doesn't form a cohesive force, the market sentiment won't try to play out to the extreme, then at this time you don't have too high expectations for the volatility rate. If we feel that the change in the characteristics of the volatility may be relatively small, then we will only make parametric adjustments, and the parametric adjustments will cause the strategy to be sensitive to change or to become volatile. If the change in the volatility is a dramatic evolution, we will adjust the matching ratio of different strategies, appropriately increase the ratio of reversal and volatility strategies, reduce the ratio of some strategies, while we will also do a study of those characteristics, which varieties are not really suitable for this stage. But if we think about the process of tracking the trend, we will think about the varietal adjustment, if some strategies are developed over a long period of time to find that it has been completely adapted to different market trends, it will be difficult to find a way to adjust the ratio of the different strategies in the long term. In short, programming, although it has many advantages over subjective human trading, its disadvantages are also obvious, although it can execute very well without emotions, but it is poorly adaptable, it is poorly resilient, when the market changes it does not keep up with changes, human can, so to do human-computer combination. Now let's get to know about high-frequency trading. The high-frequency traders in our team have been in the group since 2009 and I brought them with me, so I'm very aware of the fact that I also did a lot of high-frequency trading myself in the beginning, and I'm very aware of the current state of domestic high-frequency trading. High-frequency trading is very profitable, and in 2010 we were even able to do a record of losing less than 10 days a year. There are probably three categories of high frequency, one is the artificial high frequency, which is what we're focusing on now, and I'm going to talk about it today; another is the high frequency, which is the statistical high frequency, which is some of the trading; and then there's the predatory algorithm, the liquidity algorithm, which is done by machines, but you can't do it at home now, why? Because we have a frequency of 500 milliseconds, whereas the foreign frequency is measured in a fraction of a second, and we're not on a quantitative scale, so we're now doing the law of high frequency or short-term fluctuation, which is the law of high frequency or short-term fluctuation, which is the law of high frequency or short-term fluctuation, which is the law of high frequency or short-term fluctuation, which is the law of high frequency or short-term fluctuation, which is the law of high frequency or short-term fluctuation, which is the law of high frequency or short-term fluctu I'm going to show you the transaction records of our traders, and share our transaction records with you, so you can understand what a high frequency is.

We have to do post-trade analysis every day. Every day we have to statistically record our transactions, we can see from the transaction records that this holding time is 6, 5, 4, 8 seconds, profit and loss three prices, two prices, three prices, more times 1.6. Stop loss up to 5 price levels. Usually cut within 3 price levels. If you get 50 points, that's your prize. I don't recommend, for example, fast 7 now has 5 prices, or how many automatic stop losses, I don't recommend. The problem will be a lot. It slips very badly, we made 300, if we stop 100, of which the automatic stop loses 50, each one slips one price, I lose 3000. Artificial high-frequency trading has many requirements if you want to be successful, good trading habits, discipline is very strong, it is a prerequisite for stable profitability. To form a perfectly fine-tuned trading system and a very hard technical base, everyone looks at the perfectly fine-tuned, it must be a perfectly fine-tuned trading system, why do you want to be fine-tuned? Because fine-tuned execution is necessary to execute, if there is no standard execution, there will be problems, the most important thing in high-frequency trading is execution, a skilled basis of keen reflection, you only skilled you can do natural reflection, we a lot of time stop losses, are consciously under the loss, not I see the loss. The most important thing is the price, the importance of the price from the beginning to the end is always the first, even in 2009-2010 we only look at the price to do. At that time I do not remember looking at the K line chart, it is easy to draw four rows of numbers: sell, buy, sell, buy, look at these four numbers and you can do a day, I do not look at it, just look at the numbers, draw a picture in my mind.

Why is it important to look at a lot of things, why is it important to say research? Because this market is largely time-saving, time-saving, one thing moves and then something else moves, and when no one else reflects, we can reflect, and we can seize the opportunity of time-saving, analysis of key points, form and time point combinations, quantitative analysis, overlapping of technical indicators, our trading system must have a process from simple and then complicated. We start to add things slowly, and finally these things rise and disappear, and eventually everything will be mastered to a certain degree, becoming an automatic reflection in your brain. In fact, for the novice trader, we require that he must build up a good trading discipline and trading habits, a lot of practice, and gradually form his own trading system. For the intermediate trader, we generally try to find ways to build his confidence in the market, because he has gone through it, knows the dangers of the market, and often has a fear of the market, but not too much, so we want to help him build confidence. But for the truly mature trader, we just need to do emotional management. This is the core, that is, skills. I had a fight with a trainee, I said today you have to overvalue, you have to get your whole body naked, but he still didn't hold on to one more, and in the afternoon he took off his clothes, and he took off his clothes, explaining that this person had a game, he didn't take off because he was running away from himself. Not afraid to face himself. How do you face the market? In general, we will do a lot of practice on the basis of persistence, the goal is to practice frequently, the low goal is to zero everything you originally had, why do you like a blank paper when recruiting a trader? It is because he does not know anything, everything is done according to my discipline, my rules, he can easily form good trading habits, and habits then determine the height of your trade. Stop loss, to train this pushback to practice stop loss, train the trend thinking, form good trading habits. This is the first stage, the second stage you have to expand, train your self-control, increase the hit rate, increase the profit ratio, reduce losses. The first stage is certainly a daily loss, the simulation board can basically lose 20,000 to 30,000 per day, by the second stage I may make a loss, but my daily loss will not exceed 3,000, which has been from the downward trend. What do you mean? First of all, you have to pick it up, you have to pick it up, don't go to the next head, don't go to intercept the rocket, when to pick, this is a phrase I saw from Larry Williams' short-line trading technique, don't go to the next head, when to pick it up, until it falls to the ground and fires two bullets without moving, pick it up again, that is, when it is convenient to do it. The word convenience is important, but the word convenience, can be reversed on the plate, we basically make turns and stops on the plate on a regular cycle. Stop, stop loss without discussion, the concept of stop loss is not only a stop loss, but a continuous phased stop, a day's stop, a month's stop loss, a week's stop loss, that is, a single stop loss is a single stop loss, there is no room for any discussion, if you miss a few consecutive money, you also understand to stop, this is also a stop loss, you lost this morning, one hand lost 2000 bucks, you do not lose that is not a stop loss, you think you lose tomorrow again that is also a loss, stop this concept is forever and ever. Less, now you have to start doing the penny market, not like before, you have to filter the market, the wavelength of the market is very small, you do it, you do 10 pennies, maybe against 8 pennies, but sorry you lost 2 pennies, the whole may be a loss, why? Quick, the process must be quick, isn't there a word in Kung Fu? Kung Fu is not broken, the same logic, as long as you are fast enough, you won't get hurt in the market, how much money do you need to adjust yourself, but the premise is fast. Well, I'm talking about the precision of the cut-in point, some people say I'm doing the bandwidth, my profit target is 30 points, I definitely have to take 10 points of risk, right? At least 10 points of risk, no, we high-frequency traders do it late, he can take a one-point risk to make a profit of 30 to 50 points, because he does the cut-in point well enough. The prospects and transformations of high-frequency trading. The decline in transaction fees is a long-term trend, because the transaction fees are indeed too expensive domestically and abroad. Higher volume of transactions will bring more trading opportunities, more variety of choices, and high-frequency trading is often more successful than other trading methods. I often use high-frequency trading as a stepping stone in the creation of transactions. The most important thing is that we have always thought that risk is the first, only stability is profitable. So we have configured from the beginning to be multi-trading, multi-strategy, multi-variety, multi-cycle, multi-market, profits can be overlapped risk can be hedged, since the beginning and end we are all a team to do this, stability is profitable.

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