trading agents

I always considered finance and accounting as the most boring things you can do with a computer. And while you can earn big bucks, working for a Swiss bank, I have always preferred topics with a more physical background.

But BitCoin got me interested in how some aspects of the established financial systems work. Looking at the bitcoin price fluctuations, I long suspected that it should be possible to write a trading agent to exploit the volatility. It could follow some fix pre-programmed rules, or find the rules by itself using machine learning. All the data it would need to work on, is easily available.

Last summer started btcrobot, a service that promised just that. They have a subscription model, and I’m sure, if it doesn’t work out, they still gain and the users loose. I didn’t really want to pay hundreds of dollars just to find out if it works. And to be honest, the whole site smelled like a scam.

So I completed the Coursera class “Computational Investing 1“. It was more about portfolio management and algorithmic trading of stocks. But a lot of the material can be applied to currency trading and in special to bitcoin as well. In the homeworks we built a small trading agent and portfolio optimizer. The main metric we used was the Bollinger Bands technical indicator.

So I started implementing a bitcoin trading agent that would use bollinger bands. I didn’t want to start completely from scratch, so I skimmed through github and sourceforge for a starting point. I selected funny-bot, and started extending it. But soon, my interest switched to other projects. Remember, finance is not my primary interest. In the last months I had an eye on the exchange rates, trying to see how such an agent might perform. And I think it would be very difficult to tune, at least without experience in that field.

Last week I found out again that I suck at trading. The bitcoin price started rising like cracy. I thought if it goes up so fast, it must come down again. In a rush, I sold some of my bitcoins. I wanted to buy again after the price would crash. But the price kept rising, and I would have gotten a lot more if I sold them just two days later. Apparently I was not alone with my false prediction.

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