Project · Algorithmic Trading
Gordon
This site houses information on and positions of the algorithmic trading system named “Gordon”. This system is nearly autonomous and requires very little from the developers behind it. Gordon operates with an initial capital pool of $100k, focusing on fifty-five target companies in United States markets.
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Origins & Philosophy
The 1987 film Wall Street features an antagonist by the name Gordon Gekko. Gordon Gekko is an antihero for the financial world in the aspect of being the ultimate asset manager and wall street entity. Gekko is depicted, initially, as all knowing, all powerful, and rich beyond belief.
As the plot develops we learn Gekko is much more than lucky and employs dangerous and fraudulent practices to profit. Gekko’s famous quote from the film encompasses his ego and wisdom: “Greed, for lack of a better word, is good.”
This film is an exceptional depiction of the duality found in finance and was released in the same year as “Black Monday”, a financial crisis related to the global financial system becoming increasingly intertwined with globalization efforts. Financial markets buckled under extreme stress due to new dynamics of derivative use, excessive speculation, and immense capital flows.
Modern Methods
Since the early 1980s, financial firms and asset managers as a whole have benefited from the immense improvement in technology, utilizing it to improve the efficiency and availability of markets as well as strategy deployment.
Algorithmic trading, put simply, is the employment of technology in the management of assets with minimal human interaction. These methods are used in every major market and it is difficult to speculate the true proportion of financial transactions occurring within these methods.
Algorithms are truly “rules-based” and are not affected by emotion. Humans are emotional creatures — especially in relation to finance. Greed and fear are exceptionally strong emotions which have plagued humans since the early days of civilization.
System Operations
“Gordon” is a deep-learning based trading system built to manage an asset pool. His name comes from Gordon Gekko but features the best parts of the antihero — the non-human aspects. Gordon feels no fear, does not understand greed, and is unable to deviate from the rules provided to him.
- His brain — a deep-learning based model to predict the direction of any given security.
- His body — a mean-reversion based trading system.
Gordon makes a direction prediction on focused securities every day the US equity market is open. He generates a model for each target security based on historical data.
Nine parameters are used in this model, featuring data starting March of 2020 and ending at the end of every current quarter. Gordon validates models on an out-of-sample dataset of the most recent quarter.
These models are static until the end of each quarter but utilize constantly updating parameters. Gordon forecasts each parameter in a t+1 fashion — predicting what these nine inputs will be tomorrow in order to predict which direction a security will take tomorrow.
Gordon is allowed to trade based on his direction predictions using a mean-reversion based trade execution system. This system looks to enter and exit trades when a given security is poised to return to an “average” value.
The signals to execute are paired with Gordon’s direction prediction. When they align, Gordon performs a trade, allowing for a higher probability of positive trade outcomes, in theory.
This system is hooked up to a brokerage with 100% margin on invested capital. Gordon is allowed a set amount to buy or short in any new position, cannot enter a trade if he lacks adequate capital, and sells full positions if necessary.