settings.tab.title.demo

How do I know what leverage (risk) level to use?


Before starting to trade your Interactive Brokers account with AlgoLab, you should always use the AlgoLab Performance Viewer web application (click on "Performance Viewer" tab) to preview your profits, losses, and maximum drawdowns using your capital amount, and various leverage levels. Pay careful attention to the following metrics:

  1. Ave an rtn - Average annual return
  2. Ave an DD - Average annual drawdown. This is how much this strategy could lose each year, on average based on your amount of capital used. "drawdown" is measured as the drop from peak equity to lowest trough expressed as a percentage of your starting capital.
  3. Max dd - Maximum drawdown. This is the highest drawdown that the backtest measured for the date range that you specified in your backtest. For example, if the maximum dd was $30,000 and your capital was $100,000 and your backtest date range covered the entire 10 year period, then you should expect that at least once every 10 years to see a $30,000 (or more) decline in the value of your account at some point.
At a leverage level of "1", AlgoLab will trade 1 contract for each trade for each symbol. A leverage level of "2" will trade 2 contracts, etc. A leverage level of 1.5 will trade 1 contract 50% of the time, and 2 contracts 50% of the time resulting in an average of 1.5 contracts over time. Higher leverage levels will yields larger returns, but larger drawdowns as well.




How does the leverage (risk) level determine how many contracts AlgoLab is buying or selling for my account?


Leverage is the method of determining the number of contracts to trade per trade per symbol. It specifies an equal number of contracts per symbol. ie: if your risk is set to “2”, then you will trade 2 contracts per trade per symbol. If your risk is set to “1.5”, then AlgoLab will simulate 1.5 contracts per trade with 50% of your trades as 2 contracts and the other 50% as 1 contract, thereby averaging 1.5 contracts per trade over time. Higher risk values can mean higher profits, but could also mean worse drawdowns.




Are the Interactive Brokers commissions and fees accounted for in my Performance Viewer backtesting results?


Yes. Performance Viewer subtracts typical brokerage commissions and fees from the bacltesting results. PV also estimates and accounts for slippage which is the number of ticks typically lost by stop orders and market orders being filled at a price x number of ticks worse than the last sale price listed in historical data. For back testing purposes, typically, slippage can amount to 1 tick per round trip - ie: 1 tick of slippage per buy then sell transaction.




Is slippage accounted for in the Performance Viewer backtesting results?


Yes. Performance Viewer estimates and accounts for slippage which is the number of ticks typically lost by stop orders and market orders being filled at a price x number of ticks worse than the last sale price listed in historical data. For back testing purposes, typically, slippage can amount to 1 tick per round trip - ie: 1 tick of slippage per buy then sell transaction.




Why does the "closed trades" table on the dashboard use estimated profit and loss?


Your AlgoLab account does not include a real-time price data feed, so AlgoLab is unable to retrieve exact prices for trade entry and exit fills. Therefore the Closed Trades table can be inaccurate. For accurate trade reports, please log into your account at the Interactive Brokers web site, and generate a statement or report. The trade entry order price shown on your dashboard is the "stop limit" order that was transmitted to your Interactive Brokers account. Your "fill" is usually exactly this price, but sometimes better by a tick or two, and never worse. The trade exit order price is based on the last position update that AlgoLab recieved from your IB account. It is usually wrong by a few ticks either way depending on how far the market moved between the last update we received, and your trailing stop getting filled. Therfore, the "PL" (profit loss) shown in the Closed Trades table will be inaccurate, but usually close. When AlgoLab closes a trade due to an expiring contract, the estimated PL will be based off of the original trailing stop exit resulting in a loss which is almost always not the case. We are working on a more accurate report, but in the mean-time, please refer to your IB account statement.




Can I manually exit a trade?


Only AlgoLab Pro license can manually exit individual trades. If you have a Pro account, then you will see a red "close" button beside each position. Pressing that buton during exchange open times will manually close your position at the market. All AlgoLab trades are exited using a trailing stop. For a long position, a trailing stop order sets the stop price at a fixed amount below the market price which is the "trailing" amount. As the market price rises, the stop price rises by the trailing amount, but if the price falls, the stop loss price doesn't change, and a market order is submitted when the stop price is reached. The amount of trailing stop is an important part of the trading algorithm, and has been thouroughly tested. Allthough at times, it can be discouraging to watch your maximum profit decline before your trailing stop is hit, be assured that we have tested many different rules for exiting a trade at the highest profit, and our current method of calculating a trailing stop generally works the best.




What is the "Margin Available" field in the AlgoLab dashboard for?


Futures brokers like Interactive Brokers, as well as the futures echanges like the CME need to ensure that their clients maintain sufficient funds in their accounts to cover any adverse price moves in any positions in those accounts. Therefore, each futures contract (each symbol) has specific minimum margin requirements. For example, Interactive Brokers requires a minimum of $4000 in your futures account to trade 1 ES (S&P 500 Emini futures contract) intraday. Depending upon certain ganeral market conditions, it is possible for AlgoLab to accumulate a large number of positions in your account, and depending on how high your leverage level is set, it is possible that your account could be close to reaching or exceeding these minimum margin requirements. This is what the "P margin" field in the AlgoLab dashboard refers to - that is, this is the minimum amount of capital that the broker requires that you maintain in your account. If this "P margin" amount is close to your accoun value, then you may get a warning email from Interactive Brokers asking you to either contribute more cash to your IB account, or to close some of your positions. Be careful ramping up your leverage value too high and not having enough capital in your Interactive Brokers account to cover these minimum margin requirements. Periodically, AlgoLab will go through periods where you have one or two positions to suddenly 9 or 10 in a few hours. This is usually due to markets consolidating after a run-up, then breaking out of consolidation to start a new up-leg (or down leg if you are short). If you are trading at a higher risk level, then you could be at risk of a margin violation due to an excessive number of open positions. Reducing your risk value will result in fewer contracts traded, and a resulting lower "P margin" value. Always preview your relative risk by entering your capital and risk value into the AlgoLab Performance Viewer.




I got a "margin violation warning" email from Interactive Brokers. What does this mean?


Futures brokers like Interactive Brokers, as well as the futures echanges like the CME need to ensure that their clients maintain sufficient funds in their accounts to cover any adverse price moves in any positions in those accounts. Therefore, each futures contract (each symbol) has specific minimum margin requirements. For example, Interactive Brokers requires a minimum of $4000 in your futures account to trade 1 ES (S&P 500 Emini futures contract) intraday. Depending upon certain ganeral market conditions, it is possible for AlgoLab to accumulate a large number of positions in your account, and depending on how high your leverage level is set, it is possible that your account could be close to reaching or exceeding these minimum margin requirements. This is what the "P margin" field in the AlgoLab dashboard refers to - that is, this is the minimum amount of capital that the broker requires that you maintain in your account. If this "P margin" amount is close to your accoun value, then you may get a warning email from Interactive Brokers asking you to either contribute more cash to your IB account, or to close some of your positions. Be careful ramping up your leverage value too high and not having enough capital in your Interactive Brokers account to cover these minimum margin requirements. Periodically, AlgoLab will go through periods where you have one or two positions to suddenly 9 or 10 in a few hours. This is usually due to markets consolidating after a run-up, then breaking out of consolidation to start a new up-leg (or down leg if you are short). If you are trading at a higher risk level, then you could be at risk of a margin violation due to an excessive number of open positions. Reducing your risk value will result in fewer contracts traded, and a resulting lower "P margin" value. Always preview your relative risk by entering your capital and risk value into the AlgoLab Performance Viewer.




I got a "User Activity" email from Interactive Brokers. What does this mean?


Some of you may have received a notice from IB with User Activity in the subject line. They provide an explanation and are requesting that you provide answers to 4 questions concerning access to your IB account. Background From time to time the Broker wants to verify the status of each account with respect to trading permissions. We reiterate that the design of AL is such that YOU license AL and therefore are the User. YOU select settings appropriate to your trading preferences and control whether or not AL makes trades. As far as who has access to your account, YOU and YOU alone control access to the account through IB Key. Therefore the response below would apply:

List the first and last names of the individuals having login access to this user name.
A: Your Name

Is this user associated with an Automated, Semi-Automated or Manual Trading System?

A: Yes, Automated Trading System

If the user is associated with an automated trading system, is the system being monitored? For example, does the system make use of alert functionality such as texts or emails to a trader or other audible alerts.

A: Yes, the system is being monitored

If the user enters order activity at times when you are unable to monitor or attend to alerts, please identify the individual(s) supervising the activity during this time.

A: No other user is authorized to make trades.

If you have received the above-noted request from Interactive Brokers you may reply as noted above.




It looks like AlgoLab requires at least $50,000 of capital. Can I trade AlgoLab with less?


The minimum amount of capital to trade all 20 symbols is $50,000 USD. However, AlgoLab will automatically reduce the number of symbols you are trading when your capital is less than the appropriate amount required to trade all symbols. Accounts with less than $30,000 that trade less than our full basket of 20 symbols only place about 3 to 4 trades per week, so you won't see a lot of trades in your account compared to the number of trades that the house accounts make.




How much does it cost to subscribe to AlgoLab?


This depends on how many units of leverage you will trade with. You can calculate subscription fees by entering in your capital and laverage in the Performance Viewer (tab in your funded or demo dashboard)




Can I just send you my money, and have you manage it with AlgoLab for me?


In Canada, we can't do that. AlgoLab is a cloud-based software application that connects to your brokerage account and automatically places and manages trades based upon your own settings. We are the developers of AlgoLab software and we are not licensed financial advisors, portfolio managers, or brokers in Canada. As such, we are not allowed to provide trading or investing advice that is tailored to an individual. However, in USA AlgoLab Capital Management Ltd. is registered with the NFA as a CTA, and we offer managed accounts.




My Interactive Brokers account has been in a drawdown for over a week. Is AlgoLab broken?


Take a very close look at the AlgoLab Performance Viewer backtesting report (click on the "performance Viewer" tab on your dashboard) for your system, capital, risk and any other settings. Set some narrow date ranges, and you will see that there are many, many periods of time when your account went through a drawdown period. Avoiding drawdowns is not possible. They have happened in the past, and will continue to happen in the future. Random price behavior is one characteristic of financial markets. Market conditions constantly change, and sooner or later we will go through a condition that is contrary to AlgoLab's trading algorithms.




When I pause trading, does AlgoLab exit all of my existing positions?


No. When you set your trading system to "pause", AlgoLab will cancel all pending open orders that have not yet been filled, and will stop transmitting any new orders. All existing positions will continue to be managed until they are closed as per normal by hitting their respective trailing stops.




Can I open a tax deferred trading account with Interactive Brokers and trade it with AlgoLab?


In Canada, the short answer is no. Commodity futures or contracts are ineligible. In the US, the short answer is YES, but there are margin restrictions. For example, a $300,000 IRA registered IB account with AlgoLab with set to the lowest leverage unit of 1 contract will result in a volume of trading activity equal to a typical $100,000 AlgoLab account (IRA accounts trade at 1/3 the volume of non-IRA accounts). Profits measured as a percentage of total capital is low, but so are drawdowns, and profits are tax deferred. More information about IRA Accounts at Interactive Brokers (US customers only) In the United States, you are allowed to trade futures in your IRA account, however, futures trading in an IRA margin account is subject to substantially higher margin requirements than in a non-IRA margin account. Margin rates in an IRA margin account may meet or exceed three times the overnight futures margin requirement imposed in a non-IRA margin account. More information about IB IRA accounts here. If you are opening an IRA account, due to the higher margin requirements, you may require substantially more capital at the lowest levareg setting in AlgoLab in order to prevent margin violations. Please notify us by email if you are opening an IRA account. More information about RSP and TFSA Accounts at Interactive Brokers (Canadian customers only) Canadian customers are NOT ALLOWED to own futures or derivatives in a RSP or TFSA account, and would therefore not be compatible with AlgoLab. More information about Canadian TFSA and RSP IB accounts here.​




How do I open a second account under my name?


It is possible to open a second account at Interactive Brokers, but DO NOT make this new account a LINKED ACCOUNT. Please open a NEW account at IB using a different email address. DO NOT OPEN A LINKED ACCOUNT. A second IB account also requires a second AlgoLab account. When submitting the AlgoLab subscription form for your second account, please use a DIFFERENT email address and DIFFERENT alias name to differentiate your new account.




Why does my "P/L" and "account Value" on my dashboard fluctuate a bit when I dont even own any positions?


We require all IB accounts to specify "US Base Currency". If you have deposited a different currency in your IB account than USD (ie: if you are in Canada, and have transferred Canadian funds into your IB account rather than converting the funds to USD prior to your deposit), IB will use current exchange rates to convert your foreign currency to it's USD equivalent each time it does an account update (once every minute or so). You can convert your IB account balance to USD by following this guide from the IB web site. Note that converting your funds requires logging into TWS (Trader Work Station) which is a trading platform, and doing so will cause your AlgoLab to become disconnected. Prior to doing this, you must NOT own any positions, and you will have to reconnect your AlgoLab using the AlgoLab connect form after you have completed the conversion. https://ibkr.info/node/2059




Can I Increase the capital in my account?


Yes. Log into your online Interactive Brokers account, and wire transfer additional funds into your account. When the funds have been deposited, you may want to upgrade your AlgoLab subscription by increasing the # of leverage units (# of contracts) you are trading to keep your risk/reward ratio the same.




Can I increase the maximum leverage on my account?


Yes. We will have a form to automate this soon, but for now, just email us with your request




I got an email from IB with "Physical Delivery Notice" as the subject


You may periodically receive an email from IB with the subject "Physical Delivery Notice". This is an automatically generated warning from IB that you own a futures contract that is about to expire, and a warning that if you do not close your position, they will close it for you. Do not worry, AlgoLab automatically closes these positions just prior to their actual respective expiration dates.




I know the big firms use algorithms. What sets AlgoLab apart?


That's a really great question, and to be honest with you, I'm not really sure I know the answer. However, I do think that the general perception of exactly what "algorithmic trading" is, is a little confused. When you hear the statistic about the very high % of trades going through the NYSE as being "algorithmic", I believe that number refers mostly to the "high frequency" trading firms that employ various arbitrage tactics attempting to front run orders from large institutions as the digital data slowly makes it's way through networks, etc. These high frequency trading firms trade mainly equities (stocks), not futures like AlgoLab trades. The other large percentage of "algorithmic' trades is generated by software which is intended to assist large fund managers and institutions when they place their orders. This isn't so much using algos to identify trading opportunities (like AlgoLab does), but more to allow the efficient placement of very large blocks of orders without excessive slippage, costs, or prices running away from their target entry levels. AlgoLab on the other hand, trades a large basket of uncorrelated futures markets from crude oil, to the Yen, to Gold and Corn. Our software identifies recurring patterns in price data and takes a long or short position that typically is held, if filled, for a few hours, to a few days.




In my closed trades table, the open and close price shows a loss, yet I show a profit on the trade.


Periodically, you may notice that your trade exit price is lower than your trade entry price, yet you show a profit on the closed trade (or vise versa for a short trade). This is due to AlgoLab closing a trade due to an expiring contract. When this situation occurs (about once every 3 months or so), AlgoLab does not have access to your close price, and substitutes the price of the stop. Please ignore the open and close prices, your profit shown is the correct value.




Why do my trades seem different than the house account which is using identical settings?


It is possible for accounts to show different positions and open profit & loss for a few reasons: 1. Your AlgoLab downloads all new trades from a server each minute. At any point in time, there may be dozens of possible trades for any of the 19 symbols. It is also possible that there is than one single trade for a single symbol (ie: buy ES at 1234.00 AND buy ES at 1244.00). In the case where there is more than one trade for a single symbol, AlgoLab chooses one of the two randomly. Therefore it is possible for your account to have a completely different position than another AlgoLab account - even though you are using the same settings. 2. AlgoLab transmits STOP LIMIT orders for each trade to your Interactive Brokers account. A STOP LIMIT order is an order to buy or sell a contract when it reaches the stop price, but to NOT accept any fill that is worse than the LIMIT price. This means that it is very possible to NOT get filled at all on a trade. After thousands of trades in a year, AlgoLab will miss getting filled on about 20% of the trades. The potential losses by missing these 20% is LESS than the losses from slippage if orders were market orders, so using limits and simply 'walking away' from a missed trade is a more profitable order type. The effect of these limit orders is that some accounts will get filled, and some won't. It all works out after hundreds of trades, so there is nothing unfair about this method. 3. When AlgoLab transmits it's ENTRY order for a new trade, AND it's trailing stop order for a position, it sends an order for a price that is offset from the actual order price by a number of ticks on either side of the order price. Therefore it is very likely that you would get 2 totally different fills on the same trade for two different accounts. Also very likely, in fast market conditions, that one would get filled, and the other may not. This order price offset prevents all AlgoLab users from sending orders for exactly the same symbol and exactly the same price to avoid the negative effects of trade crowding. The amount of offset is determined by an algorithm which considers various market factors. After some significant period of time, after hundreds of trades, there won't be significant differences, but there will always be short term differences. There are some other possible reasons for differences that I discuss in the following blog post: https://www.web.thealgolab.com/single-post/2019/01/02/Why-does-the-house-account-seem-to-outperform-my-account




Do I need to subscribe to a real time data feed?


When you set up your funded Interactive Brokers account, they include a futures data package at no cost, so you should include that option when you set-up your account. IF YOU HAVE OPENED YOUR IB ACCOUNT AS A CORPORATION RATHER THAN AS AN INDIVIDUAL, THEN YOU WILL BE CONSIDERED A PROFESSIONAL. If you are a professional trader (ie: have an IB account that is owned by a corporation) and you do not have a real-time data subscription, then your position profit/loss as shown on your dashboard is still real time. At this time, it also appears that your position "last price" which you don't see on your dashboard, is also real-time (not delayed by 10 minutes as would be expected for a delayed data feed). AlgoLab will sometimes use this "last price" to transmit a stop to exit a position if the trailing stop has been gapped over. It is important that in cases such as these, the "last price" is not delayed.




Are there advantages to setting up a corporation run AlgoLab trading?


CORPORATE INTERACTIVE BROKERS ACCOUNTS
Day trading through a corporation provides the following: A fair, legitimate method of distributing the profits to the shareholders, via dividends per share if dividends are distributed equally per share. A more favorable taxation (Canada, not sure about U.S.) which allows the account to grow faster, if the money earned isn’t taken out of the corporation.
Refer to this guide on setting up a corporate Interactive Brokers account for AlgoLab (bottom of the page)




In Canada do I have to file a T2235 form reporting foreign holdings?


Your AlgoLab trades are probably considered "day trading activity" and therefore you may not have to report. According to the Canadian Revenue Agency: 33. Does a day trader have to file Form T1135? Property that is used or held exclusively in the course of carrying on an active business is not required to be reported on Form T1135. The determination of whether the activities of day trader constitute carrying on an active business is a question of fact that can only be determined on a case by case basis. For more information, please refer to:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1135.html#shr-pg0




Why do some of the AlgoLab test drive demo accounts PL charts differ from the house account?


There are times when the Interactive Brokers paper trading accounts (AlgoLab test drive demo) will outperform AlgoLab funded accounts, and times when they will underperform. It is our goal to make adjustments to the demo environment so that it always as close as possible to performance of the funded accounts, but this is difficult for a number of reasons: 1. Demo account price feeds are delayed by 10 to 15 minutes. 2. The demo environment does not consider the impact of the trade being placed whereas a funded account does and that may affect the fill price, and other results. 3. There are times when a funded account incurs more slippage, or misses more trades due to market conditions, whereas as demo account may not. 4. There are differences between all AlgoLab accounts (funded and demos) in entry order and exit order prices. see FAQ question "Why do my trades seem different than another account who is using identical settings?" for more information on this.




Why do actual AlgoLab accounts differ from the Performance Viewer backtest?


There are periods of time when AlgoLab funded and demo accounts will perform very close to the Performance Viewer theoretical backtest, and times when they will underperform. This is due to a variety of different market factors like missde trades, additional slippage due to fast market conditions, etc. Generally, over a longer period of time, they should be quite close which is why we suggest using the Performance Viewer as a rough ESTIMATE as to what kind of returns and drawdowns you might expect in the future.




Why is my closed trade profit always less than what I've seen in Positions?


AlgoLab exits your positions using a "trailing stop". This kind of exit is an order to exit your position that is set at a certain percentage below the current price. When the price goes up, it drags the trailing stop along with it, but when the price stops going up, the trailing stop order price remains at the level it was dragged to. A trailing stop is a way to capture unlimited upside profit potential while restricting down side losses to a preset amount. A trailing stop will always exit your position at less profit than your highest profit gained for the position. This is the most optimal exit method that we have tested. Some users have attempted to use the AlgoLab Pro "manul exit" button to "catch" the peak profit prior to hitting the trailing stop, but nobody has outperformed the house accounts which always exit via the rules built into the algorithm, which is the trailing stop.





  • Greg's Blog
  • LinkedIn
  • Facebook
  • Instagram

© 2020 by AlgoLab Capital Management Ltd.  |  Privacy policy  |  Contact us  |  Terms and Conditions

AlgoLab Capital Management, Ltd. is registered with the CFTC as Commodity Trading Advisor and is listed as an NFA member (NFA # 523700). This web site has been published in the United States and is not intended for use by, or to provide any information to, residents of Canada.