Through our work on the OptionsHouse API client, we’ve somehow become known as trading algorithm experts. At least once a week, Branded Crate gets a phone call or email from someone who wants to automate trading activity. To even have a thought like this requires some level of sophistication. Even so, many potential clients aren’t aware of what it takes to create and manage a system like this. That’s our area of expertise, so if you’re considering trading automation, read on to learn more about how we do it.

The very heart of any trading algorithm is the actual algorithm, written using instructions a machine can understand (code). This is mainly what clients think about when they talk to us. The idea generally seems simple at first, but complexities emerge as you begin to consider automation. Without even thinking, clients “just know” to do things a certain way as they execute their trading strategies manually. Computers, on the other hand, don’t know anything.

Let’s say a client wants to buy N shares of some stock when the current price of that stock is lower than it was at the same time on the previous trading day and sell when the current stock price is higher than the same time on the previous trading day. This is probably a terrible strategy, but ignore that because it can still serve as an example of how and where complexities emerge.

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Our newsroom ‘guild’ votes Tuesday on whether or not they will allow wage cuts for guild members. The proposed wage cuts would be 0-6%, applied progressively based on annual salary. There are a number of other concessions the company is asking for as well. Basically, if we make those concessions, the company will only lay off 16 full time guild employees rather than 21. There are no assurances that the company won’t just lay off more people later anyway. In fact, I think there’s a good possibility it will.

This used to be a great company to work for, then we saw the cost of benefits skyrocket, followed by buyouts, more buyouts, layoffs and a wage freeze, followed by suspension of 401k matching and the pension plan. Now there are more layoffs coming and possibly even wage cuts along with a host of random concessions.

We rode that bubble hard and forgot to diversify, in fact we did just the opposite. Right before the bubble began to burst we doubled down on our bet that newspapers would never fail. We increased our exposure to an already enormous risk at what could be the absolute worst possible time in history. Just as bad, we used debt to finance our added risk. Worst of all, we continue to actively shift blame to the poor economy rather than take responsibility and come up with a plan for success.

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How much do you like your favorite carbonated soft drink? Are you spending about $20 per month on soda? Lets see what would happen if you chose to invest that money in a regular annuity earning 11.6% interested (this historic return of the S&P 500 since its inception in 1926). I’ll assume that a daily soda habit costs $20 per month or $240 per year. Lets start with an 18 year old person who has chosen to place her soda money into an annuity every month. Forty years later, her annuity will be worth $497,922.

That number (in 40 years from now dollars) isn’t easily comparable to current dollars. I’ll use the consumer price index for the last 40 years (January 1968 to January 2008) to adjust this number to something that’s hopefully closer to real dollars.

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