Algorithm
You can say black-box trading, robo trading, auto trading, strategy or whatever, this is simply an Algorithm implemented in a computer program for entering trading orders, this is an Automated Trading System (ATS).
A computer algorithm decide when to buy and when to sell, this is simple as that.
Algorithmic Trading is widely used by hedge funds, pension funds, mutual funds, and other institutional traders to generate and execute orders automatically.
This is simple on paper, everybody can be rich on paper … The problem is not so simple in the real world, because you can develop a system, but you cannot say “it works” without having a strong test platform for executing computerized quantitative trading strategies.
The Algorithm is all, but is nothing without the test platform, the historical tick-by-tick data and the two connections to the market :
1- The connection to the real-time rate feed
2- The connection to the broker order execution system
If you have good ideas but if you don’t know how to write code (c++, c#, java or other) This blog is maybe not for you. Because it talks about the code structure and the strategy framework. It talks about the code implementations of strategies, and talks about implementation of strategies.
For reading this blog, you should have a basic understanding of trading system design. You will then learn some critical things that you need to get right and some pitfalls that you need to avoid (or not). You should also have a feel for the general theories behind popular types of strategies, and how to implement simple strategies “in code”.
To increase your chances of trading success, pick a trading approach that you believe in. There
are many types of profitable systems to choose from—here is a list of some of them:
- Breakout Systems
- Trend Following Systems
- Trend/AntiTrend (Reversal) Systems
- Range Trading Systems
- Gap Closing Systems
- Volatility Systems
- Intermarket Correlation Systems
- Arbitrage Systems
More information on these trading systems will be provided later. Read the general description of each system in wiki or others, and see which ones intuitively appeal to you the most. One of those systems might be good starting point for your next strategy development project, who knows ? Dr Who ?