Discretionary trader am pretty new to automated trading. Now I have tried to conceptualize one of my strategies. How do I go about it?
Its in the head, how do I get it in the computer. What is the next step. Any guidance will be helpful.
Tell us how successful your strategy has been (in real money), summarise your entry and exit routines in a manner that your mother would understand, and then everyone will be all over you for details that they will then programme (assuming your strategy really does make money). Your job will then be to get a copy of the resulting package (not an easy task).
Well, this could be one way. But currently I want to learn the process of going from discretion to algorithm and so I would want to do it myself. Any suggestions on this anyone.
Think of it like writing a recipe. When you make a trade you go through a number of steps. You just need to document them. What asset are you trading or how do you decide what asset to trade. Do you have a check to see what the trend is and how do you measure the trend. Is there some setup or basing pattern that you are looking for, or perhaps you are looking for a breakout. If trading a reversal maybe you are looking for an extreme move – again, how do you measure that. Then what is the trigger to take the trade. How do you determine what entry price you are willing to pay. Then for the exit, do you have a profit target – how do you determine it. Do you adjust it and what prompts you to do so. Do you use a stop, how do you determine the level. Do you adjust it and if so what prompts you to do so. These are all questions the algorithm has to answer. As a test you should show your steps to someone else and see how they would paper trade it. Likely in your initial drafts you will be missing steps.
If you are trading based off chart patterns, these can be subjective and very difficult to objectively describe, especially if you have no programming experience. As it is, some of the easier to use automation programs may have limitations, and the more advanced may be very difficult for those without programming experience. You could take a programming class. Translating a process into objective steps is not unique to trading, it is the essence of programming.
Thanks for the help. I appreciate the detailed explanation above. I have tried to write down my strategy in detail as you mentioned above. Next, how should I go about coding this.
As a first part I want to have the Open, High, Low and Close for a group of stocks and will will filter them.
The idea is something like that, to separate stocks from a Wishire 5000 index which show a range in excess of say 2%.
I was planning to do this in Excel, but is there a better way. Because in the end this will generate some parameters and ratios that will be compared in live markets to actual stock and on the basis of this buy and sell calls should be generated.
You should take a look at Stealth Alerts. This is the product that we use to help our manual traders convert their strategies to automated ones. Message me if you’d like more info.
Excel could be a step towards objectifying your strategy. I would think it might be easier to do from some of the popular tools such as Ninja trader or even Amibroker (once you get over the learning curve for the software), but I only trade mechanically. My screens and spreadsheets calculate my orders for me but I enter the trades manually.
Yes, In the last few days I have been able to generate some ratios and entry points using excel. Could you suggest some method for back testing?
Backtesting can be done in Excel. You can get daily data for free from Yahoo and a variety of other sources. Intraday data is often only available for a fee, though Interactive Brokers makes intraday data available to customers with some limitations.
You can have a look at www.traderscockpit.com Strategy Engine…. Get your Strategy into the system (without need to learn any scripting language) , backtest it on a click of a button and if you like the results make it live for your presonal use….
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