Lately I have been lazy to write any blog entries but I have been productive with trading, more specifically regarding my development on the journey to a better trader. I met a good old friend who seems to be doing pretty good in trading. He said his strategies are mostly algorithmic which strengthens my interest towards aromatic trading. I have many times thought about back testing my strategies automatically with coding, but did never give a thought that algorithmic trading was ever an option.
Algorithmic trading is the act of programming a trading system to work on its own. I mostly thought that is what big firms on Wall Street do and that normal commercial traders would never survive in that world. Most people think that an algorithmic trading strategy is also a quantitative strategy, in which case we are talking about high frequency trading. This is a world of ultra fast trading where nano seconds matter and trades are already made 0,00001 seconds after a news event. Obviously this is where commercial traders have no chances to compete. But an algorithmic trading strategy can also be a system that makes for example "buy and hold" long term investment decisions. A strategy that is automated fully or partly can be an algorithmic strategy. I was eager to learn as much as possible about algorithmic trading and I think these are the pros and cons of it:
An algorithmic trading system:
+ can work on its own 24/5
+ will exclude all negative effects of the human mentality (greed, fear and inaccurateness)
+ will do a 100% what you program it do
+ will simultaneously monitor as many markets as you want it to follow
- can be difficult or even impossible to program
- can sometimes lead to "black swans" (negative inexplainable surprises)
- can take a lot of time to develop
I first came up with a fantastic internet site https://www.quantopian.com, This is a free forum and portal for algorithmic traders and I believe its free because succeeding strategies are copied by the site owner so do not code your biggest trading secrets here. The site has a build in python-based terminal for back testing and live trading. It uses python as its coding language which is pretty easy to learn and powerful. I played a little with it but soon realized I would need at least a +30K trading account to trade with this on an intraday basis. I don´t have the money and the will to sacrifice 30K to my first algorithm which may work or not work.
Then I came up with the good old Meta Trader which is offered mostly by forex brokers https://www.metaquotes.net/. The metatrader uses MQL 4& 5 (meta quotes language) as its programming language. The syntax is very similar to C++ which is considered to be a difficult but very powerful language. To me the language seemed first very difficult to understand, but it is getting more clear the more I put time to look into it. So this is where I am right now: I have to master MQL so that I can write my strategy into code.
