Looking to hear some stories about algo trading, i trade manually.. shit feels like I'm bird watching, looking at charts for ages.. what benefits do algos have? Are they just strategies that the computer watches then buys/sells or can you have them run the strategy without buying or selling? Do they look for patterns through multiple tfs/instruments? How often does an algo profit.. as much as a person or more?
Algo trading
- Thread starter ThisisaUniqueusername
- Start date
An algo is simply a statement of your strategy translated into computer code. The computer reviews the code, either in real time or in back testing historical data. The real time output (signals) can be traded by you manually, or automatically with your broker.
An algo is YOUR strategy. So, garbage in, and garbage out. If your strategy is not profitable, a computer or broker is not going to make it so.
Assuming you do have a profitable strategy, automated broker trading does have some value in helping to remove your emotions from the picture, but it can also add the burden of potential technical issues. My guess is that far more retail traders trade their signals manually. The trick there is learning to take the signals and remain emotionally neutral until the trade is completed and can be analyzed, and the algo adjusted if needed.
The best place to start developing a system is with back testing software, which can help you develop algos, and hopefully lead to a profitable system. Good back testing software can develop signals from data based on any number of queries. Charts, indexes, fundamental and technical studies, etc. etc.
Good luck.
Algo trading changed my trading completely. For me the ability of backtesting ideas in a few minutes made a huge difference.
My algos checks for specific conditions every minute, some algo every tick. If there is a match, then it buys and then start to watch for the end of trading based on other conditions or simply max profit and stop losses.
I love trading, but I don't want to stare to the monitor for the whole day. I'd rather do something else and let the algo work for me. At the beginning I was watching my algos every 5 minutes, now a couple of times a day.
Also, the emotional part was hard to manage and I felt so stressed with bad days. Doesn't happen to me since I've started using algos even when you have a red day.
Last thing I've noticed is that I've stopped overtrading. This was 50% of my losses!
I still spend part of my days working on trading, but instead of staring to the monitor and over trading, I work on new ideas for new algos to test.
My algos checks for specific conditions every minute, some algo every tick. If there is a match, then it buys and then start to watch for the end of trading based on other conditions or simply max profit and stop losses.
I love trading, but I don't want to stare to the monitor for the whole day. I'd rather do something else and let the algo work for me. At the beginning I was watching my algos every 5 minutes, now a couple of times a day.
Also, the emotional part was hard to manage and I felt so stressed with bad days. Doesn't happen to me since I've started using algos even when you have a red day.
Last thing I've noticed is that I've stopped overtrading. This was 50% of my losses!
I still spend part of my days working on trading, but instead of staring to the monitor and over trading, I work on new ideas for new algos to test.
With that being said, I wonder if bird watchers make great day traders
Their is a possibility of blending quantative trading and discretionary. Linda Raschke and Adam Grimes use this approach. Using something like what happens after 4 new lows, what happens after a 3 standard deviation move, etc. Using some stats to help guide your trading.
A lot of discretionary traders struggle getting their method into pure algo trading. You need to be able to explain to the computer who works in a world of 1 and 0’s in your rules.
Things like support/resistance zones, pullbacks in an uptrend can be difficult to define. You end up with too many if() and rules where it’s hard to capture. Perhaps dealing with correlations in stocks is simple in discretionary sense but trickier telling a computer.
A lot of discretionary traders struggle getting their method into pure algo trading. You need to be able to explain to the computer who works in a world of 1 and 0’s in your rules.
Things like support/resistance zones, pullbacks in an uptrend can be difficult to define. You end up with too many if() and rules where it’s hard to capture. Perhaps dealing with correlations in stocks is simple in discretionary sense but trickier telling a computer.
An algo can also be a simple thing, it need not be lengthy and complicated.
It may just be a short length of code which alerts you to instruments which meet a few criteria.
Ie, breakouts, high volume, big moves, hitting predefined target levels....
So, you may then have an audio or visual alerts which aleviates the need for scanning multiple charts or being fixed in front of a monitor.
For longer term traders it doesn't need be in real time, end of day or 20 minutes delay will suffice.
It may just be a short length of code which alerts you to instruments which meet a few criteria.
Ie, breakouts, high volume, big moves, hitting predefined target levels....
So, you may then have an audio or visual alerts which aleviates the need for scanning multiple charts or being fixed in front of a monitor.
For longer term traders it doesn't need be in real time, end of day or 20 minutes delay will suffice.
Both are possible. You can program an algo to have it trade autonomously. But you could also program it such that if a setup is detected it sends you an email or SMS and then it is up to you whether you place that trade or not.
This is what I'm doing with my mother that lives in another country: I've set up an easy Momentum strategy to follow manually (2-4 trades per month) and all it does is sending alerts via email about when to buy and sell.
I'm using a FREE platform for this, but you can do the same in a million ways.
Then she logs in on her broker (without API) and executes the buy and sell.
Is this algo-trading? It's semi-automatic trading, simple and effective.
I've started 100% algo trading in November, you can read my thread:
https://www.elitetrader.com/et/threads/i-wrote-a-bot-and-gave-it-25k-to-trade.340739/page-19
Quite satisfied for now.