Gray-Box trading systems

There has been a divide between discretionary trading where the trader analyzes data, trades and manages orders in terms of profit and risk manually compared with system trading, where a set of programmed rules (developed and back-tested) drive this process with little or no trader intervention. Recently, systems have evolved that allow a cross-over between system and discretionary trading to produce a hybrid of the two, so the trader gets the best of both worlds.

A gray-box or hybrid trading system provides the trader with automation for the mechanical parts of trading while allowing them to use their judgment (discretion) about trading decisions - so the system seeks to inform the trader of opportunities, and manages the trading of products, yet leaves the decision to use the recommendations to the trader. A key advantage to this nimble approach is that it levers the traders knowledge to the full so that they can react quickly to changing market conditions and maximize return on effective strategies.

This contrasts with a black-box system, which is fully automated (along with the associated high cost and long lead time to profit) and existing manual "click trade" order entry systems that have little or no automation.

In most cases, a gray-box system is implemented by providing the trader with a system, such as the KaiTrade Accelerator, that sits side-by-side with existing trade entry and charting packages to provide some level of automation and control - see the diagram below:

Some programming-savvy traders have also written their own systems using Excel and RTD provided by system vendors such as TT and Pats.

We are seeing increased demand from discretionary traders, who are now using powerful charting and modeling like CQG to generate automated signals to enter and exit trading scenarios.

The trader then uses the KaiTrade StrategyPad to connect and link the signals generated from CQG to strategies that the trader has set up. The trader can then choose which strategies to use depending on their view of the market conditions.The strategies can trade a range of products (futures, options, stocks), spreads and other multi-legs (synthetic products) the trader may set up. Crucially, they offer sophisticated order management, for example controlling risk using trailing stops and locking in profits.

The system evolves as traders identify the best patterns of trading that suit the markets they are interested in. They can apply these to a range of products automatically and free up time to find new markets and methods.

KaiTrade provides all the tools needed to bridge the gaps in existing systems, and let traders and organization start implementing gray-box trading quickly. Our mix of solid engineering and trading experience lets us deliver on our commitment to enable traders to "Trade Better" today and in the future.

For more information click here or paste http://www.kaitrade.com/products/products.htm

KaiTrade supports multi-leg products

KaiTrade now lets you create and trade your own multi-leg products. This is great news for people wanting to trade:

• Inter-commodity spreads, for example, crush spread (soybean oil vs. soybean meal)
• Stock Index futures
• TED, notes over bonds spreads
• Yield curve arbitrage
• Crack spreads, for example, the 3:2:1 ratio trading oil, gasoline and distillate according to this ratio
• Butterfiles and condors
• Basis trades

Essentially, we have provided an easy tool that lets you create a product within KaiTrade and then add existing products to it. You can specify the quantity/ratio of each added product and determine how it will trade.

The system can generate the implied price of the product based on the real-time data of the legs. and you can then trade the product from the standard order ticket, the StrategyPad (for example triggered from CQG conditions) and from Excel.

We have a custom pairs trading plugin in test - this levers the multi-leg functions in a convenient way for pairs traders, and will be released in the next month.

You can get more information from our website here and we have a short video demonstrating the new capability here http://www.screencast.com/t/ahyd11HornM

Basic Pairs Trading using Excel

Here is a short demo of how to trade a simple pairs ratio using KaiTrade and the Excel Plugin

BasicPairsDemo

A more advanced demo using KaiTrade's built-in algorithims can be seen here

These are intended to show how you can sumit orders for two products simulatously from Excel and work out the P&L for the pairs trade.

Also check out our website here - http://www.kaitrade.com/KTA/PairsTrading/

Demo Videos

Here is a list of our demo and training videos - we will be extending these.

Is this the quickest way to trade from Excel?

We think our Excel plugin gives KaiTrade users the fastest way to trade multiple markets directly from Excel - Here is a short demo of how to trade from Excel using kaiTrade and TD Ameritrade.

KaiTrade Excel demo   In just minutes you can be trading your strategy.

Simple yet powerful 

It is clearly simple to trade using the tools we provide, but we also give you all the power of the KaiTrade platform:

• Access to multiple asset classes - you can trade the world
  
• Speed of a regular application
  
• Access to order management algorithms such as pairs trading and auto stops
  
• Access to baskets and synthetic products
  
• Access to real time prices and hsitoric data(depending on the broker)
  
• Access to extensions written in C++/C# using our plugin API

Our approach is quite different from other vendors in that we only use the standard Excel RTD function for both getting data into the sheet and order requests out - this means we do not install any addins (COM or VBA).

This way we avoid the complication of loading software into Excel and benefit from improved performance and execution since the work is all done in the main KaiTrade application.

Contact KaiTrade for better ways of trading!

New Drivers!

We will be bringing two new driver connections on stream this month TD Ameritrade and Cunningham (CTS) http://www.ctsfutures.com/index.aspx.

These will widen the range of markets available to our customers and allow people to trade a wider range of asset classes, for example the eMini S&P against a basket of stocks.

All the existing plugins and algos will be available for these new connections.

Triggering Algorithms from Excel

Here is a short video showing how to automatically trigger algorithms from the KaiTrade strategy pad using Excel.

http://screencast.com/t/rP96wKuPTW

This allows an Excel user to trigger a variety of execution algorithms to trade markets directly from Excel.