MM Trader - Automated Trading System

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  Frequently Asked Questions

General

Q - What is the minimum investment?
Q - I have 2 mutual funds through Janus that I invest in. One returned over 15% in one year total return, the other over 25%. The name of my game is high return with minimal effort. So how would the MM Trader help a guy like me? Could I expect returns on my investment like these mutual funds?
Q - Great! How do I get started?
Q - Is there a way to paper trade with MM Trader before I commit $25K or more in my IB account?
Q - How do I get an "apples to apples" comparison of my expected results if the paper trading account has $1 million?
Q - I have recently funded an account with IB for $25000. If I start with you today, do you prorate the charge or is it better to wait until the beginning of the month?. Also, once I purchase your program, how do I turn it on and interface it with IB?
Q - Do I need to subscribe to any of the data feeds on InteractiveBrokers?
Q - How far back did you backtest the system, and what did the performance look like pre 2002?
Q - Should I have an uninterruptible power supply for my computer if using automatic trading?

MM Trader

Q - Does MM Trader send orders to IB computers in the morning or does it stay connected throughout the day?
Q - What if the stock falls below the stop loss price?
Q - I have two accounts with Interactive Brokers, including a Real Time Paper trading account. I am seriously considering trading using your program, however I would like to run it for a while in the paper trading account to fully understand it's application and performance. Will that be possible, if I subscribe on a monthly basis?
Q - Is the MM system something you can set up in the morning, leave for work and forget it and let it do it's job?
Q - I understand one needs have a minimum of $25K to trade but can you limit the program to using 10K to 15K to use for trading the system?
Q - On average, how many open positions would you see at a time?
Q - What does the positions field mean on the MM Trader BuyScan page?
Q - How can I force the positions in buy scan to synchronize with the live accounts?
Q - Is there any difference between using standalone TWS and web-based TWS?
Q - It is my understanding that the fully automatic version performs intraday buying and selling. Will this offer improved performance compared to doing this manually using the web or e-mail version? Q - It does not look like MM Trader has full trade analysis built in. Would you recommend the use of separate trade analysis software? If so, which package?
Q - Does it help to minimize the stock list to increase scan frequency?
Q - What power scheme is recommend for unattended computer operation? No hibernation, just shut down the monitor?
Q - I manage several accounts for my wife and I. Two IRA accounts for each of us and a joint brokerage account, five total. What is your pricing structure for this?
Q - I don't know how the FA accounts work at IB. I opened one and sent my funding to that account. Should I have funded a client account in order to actually trade, or can I trade from the F account itself?
Q - How does the application interact with other trades I am placing with IB? Do automated trades show up in an IB trading screen?
Q - How do I select one automated strategy versus another?
Q - Is there a way to trade on margin?
Q - Do you need to have the Worden data subscription to have MM Trader be able to select the "proper" securities to track on a daily basis?

Web Service

Q - What are the rules to use for the prices shown?
Q - What is the MovAvg field?
Q - What is the Oversold price?
Q - Are the Real Trades based on some combination of the systems or just one?
Q - Are the trades listed in the CAF backtest page on the website produced by the same securities chosen or selected by MM Trader software on a daily basis when the Download Picks button is selected, or were those securities, i.e. in the backtest, selected by some other means?
Q - When do Todays Picks get updated? Do they change during the day?
Q - Do all stock picks in MM Trader exactlty match the ones on your todays-pick page?

General

Q - What is the minimum investment?
A - If you buy and then sell the same 4 stocks within 5 business days, the government defines you as a "pattern day trader" and certain federal regulations kick in. Since MM Trader places frequent trades, it will not take long before that event occurs. If you have less than $25,000 in the account, IB will prevent you from making the additional trades, and furthermore, the proceeds from a sell will not be available for new purchases for 3 business days. For these reasons and others, we do not allow you to use MM Trader for accounts under $25,000.

Q - I have 2 mutual funds through Janus that I invest in. One returned over 15% in one year total return, the other over 25%. The name of my game is high return with minimal effort. So how would the MM Trader help a guy like me? Could I expect returns on my investment like these mutual funds?
A - Congratulations on the good returns this year. Those funds must have had a large energy component in them because without the big gains in that sector, the S&P 500 index would actually have been down 10% for the year. A much publicized fact is that 80% of mutual funds and newsletter recommendations fail to beat the market. What's up this year is often down the next. But what if you could consistently beat the market and do so with much less risk?  That is what MM Trader is designed to do. It is a totally automated system. You simply decide on one of three risk/reward strategies that you are comfortable with and MM Trader does the rest.

Q - Great! How do I get started?
A - The first thing you will need to do is open up an account with Interactive Brokers and fund it with at least $25,000. MM Trader connects to their computers and the trades are actually executed through them.

Q - Is there a way to paper trade with MM Trader before I commit $25K or more in my IB account?
A - Yes, you can sign up for a free "paper trading" account with IB. This account contains $1M of "funny money" but let's you trade it with MM Trader as if it were real.

Q - How do I get an "apples to apples" comparison of my expected results if the paper trading account has $1 million?
A - Lets say your real account is only $50K. The recommended and default buy amount is 6% so your PositionSize would be 50000 x 0.06 = $3000. 3000 is 0.3% of $1 million so set the PositionSize field to 0.3 and the MaxInvest field to 50000 in Edit Preferences.

Q - I have recently funded an account with IB for $25000. If I start with you today, do you prorate the charge or is it better to wait until the beginning of the month?. Also, once I purchase your program, how do I turn it on and interface it with IB?
A - You can start at any time. The monthly charges will continue on the day you first sign up, or stop if you so choose. If your credit card transaction is accepted, you will have instant access to Downloads under the Products menu where you will be able to download and install the leased software and you can begin trading immediately. A quick start guide is included that shows you how to configure IB to accept the MM Trader socket connections.

Q - Do I need to subscribe to any of the data feeds on InteractiveBrokers?
A - The only data feed you need is called "US Securities and Commodities Bundle Non-professional - Level I". This is free for personal accounts if you place 15 or more round-trip trades per month, which MM Trader is likely to do. If trading through a business account such as a LLC, then you would need to subscribe to NYSE and Nasdaq exchanges.

Q - How far back did you backtest the system, and what did the performance look like pre 2002?
A - I have backtested the systems going back 20 years for all stocks that I had data going back that far and the results are similar. There is no large discontinuous change starting in 2002 which might imply a curve fit of the data.

Q - Should I have an uninterruptible power supply for my computer if using automatic trading?
A - Yes. Mine has saved me many times.

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MM Trader

Q - Does MM Trader send orders to IB computers in the morning or does it stay connected throughout the day?
A - It stays connected to IB computers throughout the day. Every 2 seconds the buy scanner moves to a new stock in the list and price data streams in for that stock. If it meets the buy conditions, a limit order is placed to buy the stock at the LastPrice.

Q - What if the stock falls below the stop loss price?
A - Every 2 or 3 minutes while the market is open, data streams in from IB computers for stocks that you own. If the LastPrice is less than or equal to the Stop price stored in MM Trader on your computer, then a market order is placed to sell the stock. Market orders are also used for profit target sells.

Q - I have two accounts with Interactive Brokers, including a Real Time Paper trading account. I am seriously considering trading using your program, however I would like to run it for a while in the paper trading account to fully understand it's application and performance. Will that be possible, if I subscribe on a monthly basis?
A - Yes, MM Trader works correctly with the paper trading account.

Q - Is the MM system something you can set up in the morning, leave for work and forget it and let it do it's job?
A - Yes, exactly. You can even automate the setup (see section 5 in user manual) so you can go on vacation or just for the convenience of sleeping in!

Q - I understand one needs have a minimum of $25K to trade but can you limit the program to using 10K to 15K to use for trading the system?
A - Yes, you can specify a maximum trading limit not to exceed.

Q - On average, how many open positions would you see at a time?
A - Depends on market conditions and what strategy you're playing. If you're playing the CAF strategy, you're pretty much maxed out all the time with 17 positions (or more if your letting it play margin), assuming you have the position size set to the recommended 6%. If you're playing the CAF-M strategy it varies a lot. If the market has been in an up trend for a while where many stocks are above their 60 day moving averages and then it takes a dive for 3 days or so, you could be maxed out. But if the market is in a down trend where many stocks are below their ma, then it's not buying much. Usually the market is going sideways and you're somewhere around 10 positions.

Q - What does the positions field mean on the MM Trader BuyScan page?
A - The positions on the BuyScan are what the MM Trader server thinks it owns based on analysis of the previous day's price movement. It may or may not match what you actually own due to variations in BuyScan timing, etc.

Q - How can I force the positions in buy scan to synchronize with the live accounts?
A - They will synchronize over time for CAF-M and CAF-MO but CAF probably never will completely because the stock picks don't have the constraint of running out of money and there are usually lots of stocks to buy with CAF.

Q - Is there any difference between using standalone TWS and web-based TWS?
A - No, but only the standalone version is supported. IB updates the browser version too frequently which can destabilize the system at an inopportune time.

Q - It is my understanding that the fully automatic version performs intraday buying and selling. Will this offer improved performance compared to doing this manually using the web or e-mail version?
A - It is primarily a convenience and huge time saver. The prices are the same. However, I have been burned in the past by placing stop orders with the brokerage. Suspiciously, there always seems to be one trade at the low of the day that happens to be at my stop price. Hmmm. The automated system doesn't show it's cards. It watches the prices and only places the order when the prices are hit. Also, there is a "momentum sell" feature built into the automated system. This feature will kick in once the SellPrice has been hit. It waits for fast rising stocks to slow before pulling the trigger to get you a better price. The automated version also can make adjustments to the prices intraday under certain circumstances. If it buys another position in a stock, for example, the average buy price will be reduced which will affect the Sell, Stop, and BuyMore prices. Also, if a stock opens below the BuyPrice, the BuyPrice will be adjusted down to the Open which will affect the other prices. Consequently, the stock may no longer meet the criteria of CAF-M so you might forget and buy it whereas MM doesn't. In this regard and in preventing you from missing trades, it will likely outperform.

Q - It does not look like MM Trader has full trade analysis built in. Would you recommend the use of separate trade analysis software? If so, which package?
A- By trade analysis, I assume you mean backtesting? There is no software that I know of that will do the complicated stock selections and multi-position cost averaging of the MM Trader. I wish there were. It took me hundreds of hours to write it myself and 20 years to figure out what to write.

Q - Does it help to minimize the stock list to increase scan frequency?
A - Hard to know for sure but the main differences I've seen between the backtest results and real trading have been missed trades. So presumably, a shorter list would increase the sampling frequency and reduce the number of missed trades.

Q - What power scheme is recommend for unattended computer operation? No hibernation, just shut down the monitor?
A - Yes, I just turn off the monitor when I leave. The included macros control the reboot of the computer each night (as a precaution in case something has hung) and the startup and shutdown of the MM and TWS software.

Q - I manage several accounts for my wife and I. Two IRA accounts for each of us and a joint brokerage account, five total. What is your pricing structure for this?
A - I have a similar situation for my own accounts. 3 IRAs and one margin account. I created a Financial Advisor (FA) account and added 4 sub accounts under the master account. The MM Trader package ($200/mo) handles this arrangement. A single order is placed which gets divvied up proportionally to all accounts.

Q - I don't know how the FA accounts work at IB. I opened one and sent my funding to that account. Should I have funded a client account in order to actually trade, or can I trade from the F account itself?
A - No trades are made from the master account. You must open client (subaccounts) under the master account. The master account is just an organizational bin. You move the money from the master to the subaccounts and then MM begins trading in them.

Q - How does the application interact with other trades I am placing with IB? Do automated trades show up in an IB trading screen?
A - Stocks that are bought by MM will show up in the TWS software, and vice versa. Stocks that are bought in TWS will show up in MM but the Auto-Trade switch for them will be off by default, meaning MM will leave them alone. However, should those stocks also show up on the MM BuyScan list, they will be taken over by MM. To avoid such mixing, it is best to use a separate account for MM.

Q - How do I select one automated strategy versus another?
A - Each stock in the Buy Scan list was chosen because it meets the requirements of one of three canned strategies built into MM Trader and it remembers which strategy it belongs to. You can select which strategy you want to play by choosing it from the Set Live Strategy drop-down list on the Preferences/Trading form. Only stocks that belong to that strategy will be eligible for purchase. Make sure stocks that belong to the strategy you are playing are included in the BuyScan list by right-clicking on it and checking that strategy.

Q - Is there a way to trade on margin?
A - Yes. If you set the MaxInvest field to more than your account balance, MM will continue to buy (assuming buying opportunities exist) up to that amount, or 2 times your balance, whichever is less. This assumes your IB account is set up for margin of course and its not an IRA.

Q - Do you need to have the Worden data subscription to have MM Trader be able to select the "proper" securities to track on a daily basis?
A - No, you do not need Worden data to run MM Trader. All the data it needs is downloaded from the MM Server every day.

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Web Service

Q - What are the rules to use for the prices shown?
A -

Q - What is the MovAvg field?
A - 60 day simple moving average of close price

Q - What is the Oversold price?
A - It is a price well below the MovAvg chosen by a proprietary probabilistic algorithm. Prices that have collapsed this far this fast are often due for a bounce and the CAF-MO strategy places a bet on it.

Q - Are the Real Trades based on some combination of the systems or just one?
A - They are mostly based on the CAF-M strategy.

Q - Are the trades listed in the CAF backtest page on the website produced by the same securities chosen or selected by MM Trader software on a daily basis when the Download Picks button is selected, or were those securities, i.e. in the backtest, selected by some other means?
A- Yes, they are the same stocks with the same prices as MM.

Q - When do Todays Picks get updated? Do they change during the day?
A - Todays picks is updated every day between 6-6:30 PM MDT. They do not change during the day.

Q - Do all stock picks in MM Trader exactlty match the ones on your todays-pick page?
A - To make it easier for manual traders, Todays Picks page does not list CAF-M stocks with BuyPrice below the Cutoff price.

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