I’ve been playing for the last three weeks with a fun project: Bitcoin algorithmic trading.

Kraken.com has a super easy restful api which allows to place orders with just a few lines of code. Using the api is free and you only need to pay 0.26% per trade.

For example, I can query my balance with three lines of code

<?php require_once ‘header.php’;
$res = $kraken->QueryPrivate(‘Balance’);
print_r($res);
?>

I can place an order to buy or sell bitcoin with nine lines

<?php require_once ‘header.php’;
$res = $kraken->QueryPrivate(‘AddOrder’, array(
‘pair’ => ‘XXBTZEUR’,
‘type’ => ‘sell’,
‘ordertype’ => ‘limit’,
‘price’ => ‘1200’,
‘volume’ => ‘0.0001’
));
print_r($res);
?>

I can query the last trades executed in the market in three lines

<?php require_once ‘header.php’; $res = $kraken->QueryPublic(‘Trades’, array(‘pair’ => ‘XXBTZEUR’,’since’=>’1486857244103748648′));
print_r($res);
?>

These three functions are all is needed to be able to build a program that looks at the direction the trades are going, check my balance and place an order.

I had a stroke of insight, an algorithm which could not fail: “If the last three trades are going up, buy it all. If the last three trades are going down, sell it all, else wait” I thought to myself my first lamborghini would be orange while I got to work building the program.

Instead of letting it loose with my money I thought it would be a good idea to backtest it first, to simulate how my algorithm would fare.

You can download the whole history of bitcoin trades for each market here. The following script scheduled with cron to run every morning at 5:00 am downloads the whole history of prices, loads it into a mysql table, runs my algorithm and outputs a file with each decision taken.

#!/bin/bash
cd /home/roge/programando/kraken/histdata
wget http://api.bitcoincharts.com/v1/csv/krakenEUR.csv.gz
gunzip -f krakenEUR.csv.gz
cd ..
mysql kraken <truncate_krakenEUR.sql
mysqlimport kraken –local histdata/krakenEUR.csv –columns timestamp,price,volume –fields-terminated-by=’,’
mysql kraken <create_ruleofthree.sql
php backtest_ruleofthree.php >backtest_ruleofthree.output

the output is 4.8 million lines long so I thought I’d use big data analysis tools such as jupyter/pandas/matplotlib to see what my algorithm had done in a nice chart. Below you can see how my algorithm is super efficient at giving all my money to kraken in fees. In less than 30.000 ticks I would have blown through all my savings. Back to the drawing board 🙂

To learn certain lessons a price must be paid. Eggs may have to be broken. 

Ten years ago, I started my MBA in Instituto de Empresa, a Spanish business school. The first weekend we had a kind of offsite, to get to know each other and start working together in a fun way.

In one of the exercises, each team was given one raw egg, 10 straws, 1 meter of duct tape and scissors. We had one hour to invent a way for the egg to be dropped from two meters and not break.

Being an MBA student I was obsessed with the idea of leadership, I took charge and convinced my team to choose my idea over the others: we would build three layers of straw protection around the egg, the air inside the straws would surely protect the egg from breaking when hitting the ground.

We worked for one hour cutting the straws, putting them together with duct tape, and carefully ensuring the egg was fully covered with this air cushion. All under my upbeat leadership, guidance and weeding out of the other, lesser ideas.

Time was up, it was go time, I stood in front of the whole class, with my team backing me and let the egg fly, sure that we would triumph where others had fallen.

Splat. The egg broke making our structure look like something an intellectually challenged three year old would have thought of, totally ignoring my leadership. I had imposed my leadership on the team, imposed my idea on the team, and led them to jump off the cliff. All with a smile on my face, nice manners, and convincing words.

I was hit with a realisation I have still not forgotten:

1. Leadership is about convincing everyone to do what you think is best. You may be totally wrong about what is best and you will only realise this once it’s too late.
2. Let the experts lead. Listen to the experts, they will probably have better ideas than you do.
3. The universe will act regardless of what you think it will do.
4. Your actions and decisions have very real consequences. 

I have the utmost respect for knowledge, I believe knowledge should be in the lead. When I hire members of my team, expert knowledge is the key driver. 

If you see a man having a heart attack on the street, you may have the best leadership attitude and jump in trying to save him, but if you don’t know CPR the man will die. A bad leader will pretend to know CPR until the man is dead. A good leader will call someone who knows CPR. An amazing leader, a Leonidas, an Achilles, a John Mclane, an Optimus Prime, the stuff legends are made of, will know CPR.

There was a mother who had two children. One day, these two children were fighting over the last orange. They both wanted it, but there was only one.
The mother weighed how to mediate in the fight, she could:

1. Punish both and none of them have any orange.
2. Split the orange and give half to each.
3. Decide to give the orange to the small child because the big brother had to learn to share.
4. Let one child split the orange and the other choose which half he prefers

Instead, the mother calmed both of them and asked them why they wanted the orange. It turned out one of them wanted an orange juice, and the other wanted an orange peel to bake muffins.

The solution became evident and the mother had successfully solved the problem. Both children were happy with the output.

I believe when there is a conflict, it usually is due to lack of understanding of the global situation. If both parties instead of venting, fussing and complaining about the lack of collaboration of the other party, calm down and aim to understand all the pieces of the problem at hand with the good will to find the best solution for all instead of overpowering the other, usually, an obvious win-win solution appears.

For this sometimes an independent third party can step in to mediate. If this party mediates, the goal will be to find this win-win. If this third party arbitrates, usually the outcome will be imposed, and not be satisfactory for both, or for any.

Let’s stop fighting about oranges 🙂

19 April 1995. Pittsburgh. Pennsylvania. McArthur Wheeler decided to rob two savings banks. He had an infallible plan.

Since lemon juice can be used to write invisible letters which are only revealed when the letter is heated, by smearing lemon juice on his face, McArthur was certain that he would be invisible to the security cameras. He even tested it by taking a selfie with a polaroid, which for some reason came out blank. When he was caught by the police after being identified by reviewing the security footage, his comment was: “But I was wearing the Juice!”

Psychologists Dunning and Kruger studied this case and arrived at the conclusion that the less competent an individual is at a specific task, the more likely they are to inflate their self-appraised competence in relationship to that task. This phenomenon is today known as the Dunning-Kruger effect.

We can see examples of the Dunning-Kruger effect in :

• Shows like American Idol where we see people who clearly can’t sing, who are surprised and complain when they get rejected.
• Nobel prize winning economists losing $4.6Bn in 4 months in Long-Term Capital Management.
• Billionaire businessmen running for president of the USA
• Amateur investors losing money in bitcoin investments

To some degree we all suffer the Dunning-Kruger effect. It is wise to acknowledge this and be self-critical when evaluating the work of others.

I’ve discovered a new tool which I find quite cool: Selenium IDE.

Selenium is a plugin for firefox which allows to automate actions on a web browser in a similar manner that microsoft excel allows you to record macros and them play them back. This can be very useful if on your day to day you manually repeat the same actions on a web application, for example downloading every day the status reports from the company issue management tool in excel to check the top outstanding issues.

To get selenium up and running just follow these simple steps:

1. with firefox, open https://addons.mozilla.org/en-US/firefox/addon/favorites-selenium-ide/ and download by clicking on “Add to firefox”, click on Install and restart Firefox.
2. Open Selenium IDE from your firefox browser by clicking on the top right icon called “Open menu”, click on Developer, and click on “Selenium IDE”, you should see your selenium IDE window pop up.
3. As the Selenium IDE window opens, it’s ready to record your first test, open a tab in firefox, go to http://www.rogeliorodriguez.net , right click and select “assert Title”
   1. 
4. go back to the Selenium IDE window and click on the green Arrow with a dash, you will see that the action has been replayed and that the test has passed successfully.
   1. 
5. To test that this works we can change the assertion so we can check that with the wrong title the assertion fails
   1. change the assertion to “wrong title” and click on the green arrow with a dash again. you will now see that the test fails, as expected, proving that the assertion works.
   2. 
6. That’s it, you are now set to start using selenium IDE, explore the rest of the commands available with right click. In a future post I will investigate how to integrate this with Java programming so you can perform more complex tests.

It seems Bitcoin isn’t as independent as I thought it was.

Today around 13:00 the price of bitcoin fell sharply after the Chinese central bank announced that they would not allow two of the major Chinese exchanges to permit bitcoin and litecoin withdrawals for a month.

http://www.coindesk.com/bitcoin-price-sinks-1000-chinas-exchanges-cut-withdrawals/

How I read it is:

1. Bitcoins can be freely exchanged between individuals. Blocking this would be as restrictive as blocking internet access to certain webpages (something that China has already done in the past)
2. Since it’s hard to block people from exchanging bitcoins, what governments can do is force the hand of the exchanges (Kraken, Poloniex, or in this case Chinese exchanges Huobi and OKCoin) to block withdrawals or exchanges into fiat currency.
3. Since businesses, salaries and day to day life still happens in fiat currency. By blocking the exchange from cryptocurrency to fiat currency, the value of the cryptocurrency can be put into question. If you can’t turn your cryptocurrency to “money”, you are stuck with something worthless.

This could change in the future if payment in cryptocurrency becomes ubiquitous. Then people would not have to change back into fiat.

This could also change if the central banks issued their own cryptocurrency and guaranteed a 1 to 1 matching between their fiat and their cryptocurrency. This would also reduce the volatility of the cryptocurrencies.

As we speak, kraken.com, one of the major UK Based Exchanges is offline, probably due to the excess traffic from so many people panicking to sell their bitcoins. Also, as a side note, my personal bitcoin portfolio has taken a big hit, I will follow with interest the next days for this rare new world of virtual value 🙂

In the spring of 1987, the town of Alba Iulia, Romania, had a change request to their infrastructure.

They wanted to build a boulevard. The problem was that a 7600 ton building hosting 80 families was on the way. Of course they opted for the sensible solution that anybody would have thought: They split the building in two halves, with the families still living inside, and moved each half of the building 55 meters on each direction. People remained inside at all times, and just to prove a point, a woman decided to place a glass of water on the edge of her balcony. It didn’t spill a drop. The building remained connected to all utilities (water, electricity, etc) during the moving process.

In IT we do invisible things. Google is 2BN lines of code, Reading it at one line per second non-stop would take 63 years. And yet us users don’t see this, for us it’s just a web page which we use. How complex can it be? Surely not that much, after all my cousin’s son who is 15 years old is a whiz-kid programming in Javas.. This invisibility of IT has many unfortunate consequences, architects can learn from each other and appreciate the beauty of the technique in the buildings they create. Quality comparisons can be easily established at plain sight. Barcelona’s Cathedral La Sagrada Familia is obviously different to Kirchberg’s church. How to compare the code from google to the code from windows, to the code that runs my computer’s mouse? We can’t because we don’t see it, sometimes even if we would like to see it we can’t because it’s proprietary software.

Bad design of IT solutions brings misery to the users and elevated maintenance costs to management.

It is unintuitive for an end user to know the complexity of a change that he is requesting in the underlying platform.He could think he’s asking for something “standard/state of the art/our competitors did it” (build a boulevard) without understanding the invisible underlying complexity (move a building)

When a new requirement, or a change in a requirement comes in late, and must be delivered without taking the appropriate time to adapt the design. The solution will not be robust.

Let’s listen to our builders of invisible boulevards.

A couple years ago, I built with an arduino, a peristaltic pump, an LCD display and an H-Bridge motor controller, a watering machine for the orchid I keep at the office.

The other day I pressed a button I had put in place to be able to configure the timing for the watering and I must have pressed the sequence wrong (was it push, hold, push, push? or was it push ,push, hold, push…) so now instead of watering for 10 minutes in order to fill the pot and empty it, it just waters for 1 minute. To avoid my orchid from drying up I’ve reverted to the manual workaround of taking it to the kitchen by hand, but this is no way to water a plant…

I could take the whole system home, connect it to my computer and test it out of course, but it would be much cooler to go to the office with a raspberry pi-wifi hotspot, connect to it with my iphone and reload the (simplified) program.

To do it I’ve prepared my raspberry pi the following way:

1. set up the wifi hotspot
2. Install arduino
   1. sudo apt-get update
   2. sudo apt-get install arduino
   3. sudo apt-get install python-dev
   4. sudo apt-get install python-setuptools
   5. git clone git://github.com/amperka/ino.git
   6. cd ino
   7. sudo python setup.py install
   8. sudo apt-get install picocom

      1. to exit picocom serial [CTRL + A] followed by [CTRL + X]

3. Connect the arduino to the raspberry pi via usb
4. Load the program
   1. mkdir blink && cd blink #we must work on an empty directory
   2. ino init -t blink # initiates a project using “blink” as a template, copy libraries into
   3. ino build # compiles the sketch, creating .hex file (default Arduino uno -m atmega328 for duemilanove)
   4. ino upload # uploads the .hex file

A colleague at work (hi Clemens! :)) has shown me the wonders of Maven, it’s a really cool tool to standardise the way Java projects are compiled, tested, packaged and distributed and also provides a great way to standardise which libraries and versions are used and downloads them automatically for you.

As everything with my blog, this is more for my future self-reference than to teach anybody anything, as I’m learning it as I go myself. Here’s what I’ve done

1. Installing Java
   1. sudo apt-get install python-software-properties
   2. sudo add-apt-repository ppa:webupd8team/java
   3. sudo apt-get update
   4. sudo apt-get install oracle-java7-installer
   5. create $JAVA_HOME environment variable
      1. get path to java
         1. sudo update-alternatives –config java
         2. remove the trailing /jre/bin/java, for example if update-alternatives returns:
            /usr/lib/jvm/java-7-oracle/jre/bin/java, then the path for JAVA_HOME is /usr/lib/jvm/java-7-oracle/
      2. add JAVA_HOME=”YOUR_PATH” to /etc/evironment
      3. source /etc/environment to reload the file
      4. java -version should now work
2. Installing maven:
   1. wget http://www-us.apache.org/dist/maven/maven-3/3.3.9/binaries/apache-maven-3.3.9-bin.tar.gz
   2. tar -zxvf apache-maven-3.3.9-bin.tar.gz
   3. add the apache-maven-3.3.9/bin directory to the PATH environment variable by editing /etc/environment
   4. source /etc/environment to reload the file
   5. mvn -v should now work
3. Creating a test maven project using an archetype. An archetype is just a template to create the folders structure and the default pom.xls file
   1. mkdir testmaven1
   2. cd testmaven1
   3. mvn archetype:generate -DgroupId=com.mycompany.app -DartifactId=my-app -DarchetypeArtifactId=maven-archetype-quickstart -DinteractiveMode=false
   4. this will create a folders structure and a pom.xml file
4. Adapting the pom.xml file
   1. The pom.xml defines what maven will do, through the following configurations
   2. These variables define your application
      1. <groupId>com.mycompany.app
         <artifactId>my-app
         <packaging>jar <version>1.0-SNAPSHOT
         <name>my-app
         <url>http://maven.apache.org
   3. To define the modules and versions that will be used, use the block
      1. <dependencies>
         <dependency>
         <groupId>junit
         <artifactId>junit
         <version>3.8.1
         <scope>test
   4. In order to find the details of the dependency you can use mvnrepository.com, for example to figure out the details for the apache POI library you can visit: https://mvnrepository.com/artifact/org.apache.poi/poi/3.15
   5. Maven has a lot of plugins. Plugins are Mojos (Like Pojos, but Maven plain Old Java Object) which can be executed when running different goals.
      1. <build>
         <plugins>
         <plugin>
         <groupId>org.codehaus.mojo</groupId>
         <artifactId>buildnumber-maven-plugin</artifactId>
         <version>1.4</version>
         <executions>
         <execution>
         <phase>validate</phase>
         <goals>
         <goal>create</goal>
         </goals>
         </execution>
         </executions>
         <configuration>
         <doCheck>false</doCheck>
         <doUpdate>false</doUpdate>
         </configuration>
         </plugin>
         </plugins>
         </build>
5. Executing different steps in the  Build Lifecycle
   1. If you want to compile, test and package your java project for example, it’s as easy as running mvn package.
      1. validate – validate the project is correct and all necessary information is available
      2. compile – compile the source code of the project
      3. test – test the compiled source code using a suitable unit testing framework. These tests should not require the code be packaged or deployed
      4. package – take the compiled code and package it in its distributable format, such as a JAR.
      5. verify – run any checks on results of integration tests to ensure quality criteria are met
      6. install – install the package into the local repository, for use as a dependency in other projects locally
      7. deploy – done in the build environment, copies the final package to the remote repository for sharing with other developers and projects.

My son Pelayo loves building puzzles.

He is almost three, so he’s managing to put together 6 to 12 piece puzzles. Observing him struggle with the frustrations of the problem at hand, I see some parallelisms with my day-to-day as a Financial IT manager:

1. Sometimes he has a piece in his hand that still cannot be put. His narrow view does not allow him to understand that that piece still can’t be put, so he tries to fit it until either he succeeds in hammering it into the wrong place, or by chance he drops it or loses focus on it and takes another piece which can be placed. Things take time. Sometimes it’s not the right time to put a certain piece in place. We can hammer it in place or we can take a step back and drop that piece for later.

2. Sometimes he is trying to put the piece in the right place, but since he has previously hammered the wrong piece into another place, he can’t put the piece where it should go. This confuses him: “But this is surely the cat’s tail! This must go here!”. He does not have the vision to know that there is another piece which is in his way. He tries things until by chance he takes out the wrong piece out of the way. Sometimes there is something blocking in another area which impedes us to progress, until this is fixed, we won’t be able to progress.

3. Since there is only one way all the pieces fit, and the puzzle gives immediate feedback on whether things are going well or not. If he does not lose his patience, he always ends up finishing the puzzle without needing for my help. It’s just a matter of time. Eventually things will be delivered.