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Autotrading
Posted by: | CommentsMany hedge funds and other entities that manage money through forex trading use some form of autotrading in their daily activities. Autotrading is common in the currency trading.
Previously these autotrading programs also known as Expert Advisors or Forex Robots were expensive costing like thousands of dollars and only wealthy individuals or big institutions like hedge funds could afford them.
However, the recent advancement in computer programming has made it possible for professional forex traders to team up with a software expert to develop their own autotrading systems. Many private individual traders have also begun to adopt autotrading to execute their thoroughly backtested and highly optimized forex trading strategies.
The recent advancement in computer programming has made these Expert Advisors cheap. The price of these Expert Advisors has come down to around a few hundreds that can be easily purchased by ordinary investors like you and me. Metatrader platform makes it real easy to program such type of Expert Advisors.
Recent advancements in computer programming has led to the development of trading platforms that allow an API ( Application Programming Interface) which connects the trader’s system to the dealer’s trade execution structure through the trading platform. So what is autotrading? You must have heard or read a lot about the benefits or advantages of autotrading.
The trading system needs to be ruled based and mechanical in nature with clear cut entry and exit rules. Once all of the trading rules and criteria are determined by the trader, programming an API can be relatively straight forward for anyone with programming experience. APIs requires programming skills on the part of either the trader or a programmer hired by the trader. After the specific trading rules and criteria are determined, the trading strategy is backtested with positive results.
The development of an autotrading system depends more on your trading skills as compared to your programming skills. When this occurs not only trades entered when predetermined technical criteria is met but trade exits in the form of stop loss and take profit rules can also be programmed into the API. Autotrading is almost as simple as flipping a switch to begin the trading process.
This creates an entirely self contained autotrading system. So autotrading can actually execute real trades on current real time market prices. When a predetermined signal emerges, the software actually places a trade automatically. However, before an autotrading system is put on live trading, it is thoroughly backtested and forward tested to make sure the likely success of the autotrading system.
In fact, autotrading is perhaps the best way to achieve it if the trader has optimized and perfected this type of black and white trading strategy that runs devoid of human judgment. Any nondiscretionary technical trading strategy that has clear cut, unambiguous rules is a good candidate for autotrading. Autotrading effectively eliminates all human biases, errors and emotions in the trading process.
There are a number of successful autotrading systems now available in the market for the ordinary retail investors. The best two are FAPT and Ivy Bot.
Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account! Grab a totally unique version of this article from the Uber Article Directory
Know What Is Backtesting (Part II)
Posted by: | CommentsThe first was doing automated Backtesting. Automated Backtesting is easy. The second method of Backtesting is performed manually and visually by the trader. The trader would take the historical data and scroll back in time on a chart and manually apply the trading strategy as if it was in a real time environment.
The trader would advance the chart bar by bar in order to refrain from seeing price action subsequent to the trade at hand. This eliminates trading in hindsight that is detrimental to an objective backtest.
Manual Backtesting is complicated and difficult. It requires a lot of patience on part of the trader. The major disadvantage of Backtesting as compared to automated testing is the significant potential for human error in executing simulated trades and recording performance results.
Emotions are your enemy in trading. When you do manual Backtesting, these emotions can cause problems for your Backtesting results. The normal range of human emotions and biases that often interfere with actual trading can be a detrimental factor in achieving objective backtest results. Furthermore, it takes a great deal of work and discipline to simulate trades manually over a large data set without straying from the strict rules of the trading strategy.
These were some real disadvantages of manual Backtesting. However, this provides valuable trading experience although simulated but still a valuable trading experience that no automated backtest could possibly provide. Backtesting manually can provide the trader with the real feel for actually trading the strategy.
Backtesting can save traders a great deal of time and money that might otherwise had been wasted on trading unprofitable strategies. Backtesting whether done manually or automatically can be one of the most important elements of building a solid trading strategy.
Autotrading is the latest fad especially in forex where the number of major currency pairs is only six and this makes programming autotrading easy. Any mechanical trading system can be backtested. This leads us to the important question of autotrading. These autotrading systems are popularly known as Expert Advisors or Forex Robots.
The US Stock Market has got more than 50,000 stocks listed with them as compared to the forex market where there are not more than six major currency pairs. This makes programming a stock trading robot a bit complicated. However, during the past decade major breakthrough in computer programming has been made.
Big institutions like banks, corporations and hedge funds have always been taking benefit of these autotrading systems. Backtesting is one of the most important components of testing an autotrading system.
So what type of trading strategies can be backtested and autotraded? Any trading strategy that is rule based and is not discretionary or discrete. These types of strategies are primarily technical in nature, and they must necessarily have rules and criteria that are unambiguous. Backtesting and autotrading are two important components of implementing trading strategies that generally do not rely upon the trader’s judgments or discretion.
Backtesting allows the trader to determine if a given strategy would have been profitable using past price data, which is an indication of how it might potentially perform in the future. In contrast, autotrading actually executes real trades automatically according to a pre – programmed set of instructions that sets trade entries, stop losses, and profit limits.
Mr. Ahmad Hassam has done Masters from Harvard University. Try This Cash Printing Forex Signal Service From Heaven! First practice on your Forex Demo Account! This and other unique content ‘forex’ articles are available with free reprint rights.
Holidays Trading
Posted by: | CommentsOctober is the month in which the most infamous crashes historically took place. The party starts in December and continues in the early part of January with some hangover effect. So what is the January Effect?
New Year is the end of a year and the beginning of a new year. This is what makes the January Effect so special. There is usually a rally in the stocks in the first few days of January. There are various reasons behind the rally. Most of the people are trying to pay their taxes at that time of the year. The companies are trying to show a good performance at the end of the year by cleaning their balance sheets. The January Effect can be quite a rally but much depends on the strength of the economy, how good December was and is there any catalyst to move the markets. There is usually a significant rally in the early part of January that actually sets the tone for the rest of the month and sometimes for the rest of the year. New Year is party time. People are in exuberant mood. Everyone wants to forget the past year and start the coming year with high hopes and good expectations. This is what is so special about the January Effect. So what is this January Effect? January Effect actually starts in the mid December and tends to favor small stocks. The most profitable period as measured statistically has been found to start from December 31st and end around February 28th with an average rate of return of 6.6% on smaller stocks.
Now January Effect may happen or may not happen but the turn of the month that is the last day of the month and first five days of the next month form a very good seasonal pattern. Now, you must know this fact that the January Effect is not guaranteed every year. The best example is the year 2007 when the market became bearish and didnt start to look to bottom out until March 2008.
If you buy stocks at the last day of the month and hold them for the first five days for the next month, chances are you are going to make some profit. This can be a good swing trading strategy. At the end of the fifth day you move your money back into the money market funds. Turn of the month is a very good seasonal pattern that actually holds up more often than not.
Why the end of each month is good for trading? This system works because the pension funds tend to put new money to work during the holidays and the overall tendency of the market to rise improves. You can do the same on the holidays. Move your money in on the day before the holiday and sell it on the day after the holiday.
Holidays are good for your mood. Everyone is happy to escape the drudgery of their daily routines. People want no worries in the holidays. People start to feel happy when the holidays approach and buy stocks before they run off to celebrate Christmas, the fourth of July, the Labor Day and so on. After the party the reality sets in the stocks are usually sold off. The holidays and those times when people traditionally take vacations often lead to higher prices. Fewer traders lead to lower trading volume which in turn tends to exaggerate price moves.
The three days before the New Year Eve and the first three days trading days after the New Year are your best holiday bet for making money. Thats because these days fall within the most bullish time period of the year, winter!
Mr. Ahmad Hassam is a Harvard University Graduate. Try This 1500 Pips A Day Forex Signal Service! Know These Candlestick Patterns! You are welcome to reprint this article – but get your own unique content version here.