System and method for money management using a plurality of profit levels in an electronic trading environment

• US 20040153392A1
• Filed: 05/29/2003
• Published: 08/05/2004
• Est. Priority Date: 01/31/2003
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: West, Robert A., Ziemkiewicz, Peter F., Burns, Michael J., Highland, Ryan J.
• Granted Patent: US 7,707,098 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A system and method for money management in an electronic trading environment are presented. According to one embodiment, a money management application intercepts an order before the order is sent to an exchange, and determines a plurality of P/L levels, based on which the money management application then selects a set of money management parameters to be used to control or modify order parameters before the order is sent to the exchange. The plurality of profit levels may include a net profit level determined based on a trader'"'"'s net position and a current market level, a realized profit level determined based on trader'"'"'s sells and buys associated with the tradeable object, or an open profit level determined based on the realized and net profit levels. The set of money management parameters may include a maximum order quantity and a maximum net position so that, for example, if the order quantity associated with the order is higher than the maximum order quantity associated with the applicable set of money management parameters, the order quantity may be modified to the maximum order quantity.

Claims

18. A method for money management in an electronic trading environment, the method comprising:

defining a first plurality of money management filters, wherein each filter is associated with at least one filter criterion and filter condition, wherein the at least one filter criterion comprises at least a net profit level, and wherein the at least one filter condition comprises at least one maximum order quantity and maximum net position that are used to control order parameters;

entering an order to be sent to an electronic exchange, wherein the order is associated with a tradeable object;

determining a net profit level for a trader based at least in part on a trader'"'"'s net position and a current market level;

based on the net profit level, selecting a first money management filter to control order parameters associated with the order; and

modifying an order quantity associated with the order to a first maximum order quantity associated with the first selected money management filter if the order quantity is higher than the first maximum order quantity.

1. A method for money management in an electronic trading environment, the method comprising:

entering an order to be sent to an electronic exchange, wherein the order is associated with a tradeable object;

determining a trader'"'"'s net profit level based at least in part on a trader'"'"'s net position associated with the tradeable object and a current market level;

based on the trader'"'"'s net profit level, determining a set of money management parameters to be used to control order parameters associated with the order; and

applying the set of money management parameters to the order before the order is sent to the exchange.

2. A computer readeable medium having stored therein instructions to execute the method of claim 1.

3. The method of claim 1, wherein the net profit level is determined using a following relationship:

Net profit level=(sells−

buys)+(net position×

market price).

4. The method of claim 3, wherein the market price comprises a last traded price.

5. The method of claim 1, wherein the set of money management parameters to be used to control order parameters associated with the order comprises a maximum order quantity and a maximum net position.

6. The method of claim 5, wherein applying the set of money management parameters to the order before the order is sent to the exchange comprises:

if an order quantity associated with the order is higher than the maximum order quantity, modifying the order quantity to the maximum order quantity; and

sending the modified order to the electronic exchange.

7. The method of claim 5, wherein applying the set of money management parameters to the order before the order is sent to the electronic exchange comprises:

determining a trader'"'"'s net position; and

if the trader'"'"'s net position is higher than the maximum net position associated with the set of parameters, preventing the order from being sent to the exchange if the order were to increase the trader'"'"'s net position.

8. The method of claim 1, further comprising:

defining a plurality of money management filters, wherein each filter is associated with at least one filter criteria comprising at least one profit level, and wherein each filter is further associated with a set of money management parameters comprising a maximum order quantity and a maximum net position, and wherein the plurality of money management filters are applied to the order before the order is sent to the electronic exchange.

9. The method of claim 1, further comprising:

determining an overall net profit level based on trader'"'"'s net positions associated with a plurality of tradeable objects being traded by a trader and further based on current market levels associated with each of the plurality of tradeable objects, wherein the overall net profit level is used to determine a set of money management parameters to be used to control the order parameters associated with the order.

10. The method of claim 1, further comprising:

determining a realized profit level based on trader'"'"'s buys and sells associated with the tradeable object; and

using the realized profit level to determine the set of parameters to be used to control the order parameters associated with the order.

11. The method of claim 10, wherein the realized profit level is determined using a following relationship:

Realized profit level=Sells−

Buys.

12. The method of claim 10, further comprising:

determining an open profit level based on the realized profit level and the net profit level; and

using the open profit level to determine the set of money management parameters to be used to control the order parameters associated with the order.

13. The method of claim 12, wherein the open profit level is determined using a following relationship:

Open profit level=Net profit level−

Realized profit level.

14. The method of claim 1, further comprising:

defining a plurality of time-based money management parameter sets, wherein each time-based money management set is associated with at least a time-based trigger criteria and at least one money management condition for controlling the order parameters;

determining at least one applicable time-based money management parameter set based on time of day; and

applying at least one money management condition associated with the at least one applicable time-based money management parameter set to the order.

15. The method of claim 1, wherein the set of money management parameters are further determined based on data from outside sources.

16. The method of claim 1, wherein the set of money management parameters are further determined based on data being received from at least one electronic exchange.

17. The method of claim 1, further comprising:

determining a profit level associated with a working order; and

using the profit level associated with the working order to select the set of money management parameters to be used to control order parameters associated with the order.

19. A computer readable medium having stored therein instructions to execute the method of claim 18.

20. The method of claim 18, wherein the first plurality of money management filters are divided into a plurality of filter bands, wherein each filter band is triggered upon detecting a band triggering net profit level, and wherein each filter band comprises a plurality of money management filters.

21. The method of claim 20, wherein each of the plurality of money management filters within the filter band triggers upon detecting a predetermined net profit level that is lower than the band triggering net profit level, and wherein orders being sent by the trader are controlled by the plurality of money management filters within the filter band until a trader reaches a higher band triggering net profit level associated with a next filter band.

22. The method of claim 18, wherein the net profit level comprises an overall profit level determined based on a plurality of net positions associated with a plurality of tradeable objects being traded by the trader, and wherein the overall profit level is further determined based on a plurality of last traded prices associated with the plurality of tradeable objects.

23. The method of claim 18, wherein the net profit level is determined using a following relationship:

Net profit level=(sells−

buys)+(net position×

market price).

24. The method of claim 18, further comprising:

defining a second plurality of money management filters, wherein filter criteria associated with the second plurality of money management filters are based on a plurality of realized profit levels, and filter conditions associated with each of the second plurality of money management filters are associated with at least a maximum order quantity and a maximum net position;

determining a realized profit level associated with a trader based on trader'"'"'s buys and sells associated with the tradeable object;

based on the realized profit level, determining if a second money management filter associated with the second plurality of money management filters is applicable to the order; and

applying filter conditions associated with the second filter to the order parameters, wherein if filter conditions associated with the first filter are different than the filter conditions associated with the second filter, the most conservative filter conditions are selected to control the order parameters.

25. The method of claim 23, further comprising:

defining a third plurality of money management filters, wherein filter criteria associated with the third plurality of money management filters are based on a plurality of open profit levels, and filter conditions associated with each of the third plurality of money management filters are associated with at least a maximum order quantity and a maximum net position;

determining an open profit level based on the realized profit level and the net profit level;

based on the open profit level, determining if a third filter of the third plurality of money management filters is applicable to the order; and

applying filter conditions associated with the third filter to the order parameters, wherein if the filter conditions associated with the third filter are different than filter conditions associated with the first and second filter, the most conservative filter conditions are selected to control the order parameters.

26. The method of claim 25, wherein the open profit level is determined using a following relationship:

Open profit level=Net profit level−

Realized profit level.

27. The method of claim 18, further comprising:

defining a plurality of time-based filters, each time-based filter associated with at least a time-based trigger criteria and a set of filter conditions for controlling the order parameters; and

applying the plurality of time-based filters to the order before the order is sent to the exchange.

28. The method of claim 27, wherein the plurality of time-based filters are further associated with filter criteria being triggered based on data from outside sources.

24-1. The method of claim 23, wherein the realized profit level is determined using a following relationship:

Realized profit level=Sells−

Buys.

29. A system for money management in an electronic trading environment, the system comprising:

a trading application for entering an order to an electronic exchange, wherein the order is associated with a tradeable object; and

a money management application for intercepting the order before the order is sent to the exchange and dynamically determining at least one profit level based on a trader'"'"'s net position and a current market level associated with the tradeable object, and based on the at least one profit level, applying to the order a plurality of money management parameters before the order is sent to the exchange.

30. The system of claim 29, wherein the plurality of money management parameters comprises a maximum order quantity and a maximum net position.

31. The system of claim 30, wherein the money management application is further configured to lower an order quantity to the maximum order quantity if the order quantity is higher than the maximum order quantity.

32. The system of claim 29, wherein the plurality of money management parameters are associated with at least one money management filter that is selected based on the at least one profit level.

33. The system of claim 32, wherein the at least one money management filter comprises a time-based filter.

34. The system of claim 30, wherein the at least one money management filter comprises a filter that is further triggered based on data from outside sources.

35. The system of claim 29, wherein the at least one profit level comprises a net profit level determined based on the trader'"'"'s net position and a current market level.

36. The system of claim 35, wherein the net profit level is determined using a following relationship:

Net profit level=(sells−

buys)+(net position×

market price).

37. The system of claim 35, wherein the money management application is further configured to determine a realized profit level based on trader'"'"'s sells and buys associated with the tradeable object, and to use the realized profit level to dynamically determine the set of money management parameters to be applied to the order.

38. The system of claim 37, wherein the realized profit level is determined using a following relationship:

Realized profit level=Sells−

Buys.

39. The system of claim 37, wherein the at least one profit level comprises an open profit level determined based on the realized profit level and the net profit level.

40. The system of claim 39, wherein the open profit level is determined using a following relationship:

Open profit level=Net profit level−

Realized profit level.

41. The system of claim 29, wherein the money management application is further configured to determine at least one overall profit level based on a plurality of net positions and a plurality of current market levels associated with a plurality of tradeable objects being traded by the trader, wherein the money management application is configured to determine the set of money management parameters to be applied to the order based on the at least one overall profit level.