Algorithmic trading has been increasing over the last years and there are no signs of diminishing interest. Xtrade has compiled the algorithmic trading tips for Forex traders and investors. Special attention has been put on the Do-It-Yourself possibilities.
Algorithmic trading, the use of artificial intelligence in Forex, and arbitrage models are an ever-expanding portion of contemporary investors’ arsenals, with such systems accounting for 80% of Forex futures volume in the 10/2012 — 10/2014 period, according to the CFTC. Publicly available tools, data sets, brokerages and strategies reduce the entrance threshold to anyone with a PC, internet connection, enthusiasm and endless evenings. We at Xtrade have taken a look at algo trading and came up with a few tips, in order for you to familiarize with the brave new world. (or, rather, new world for the brave).
Do-It-Yourself Algorithmic Trading Possibilities
What makes the concept of algorithmic trading most alluring is the potential DIY (Do It Yourself) possibilities. Online courses, like “Computational Investing,” taught by Georgia Institute of Technology professor Tucker Balch are popular and growing. Yet, while more than 170,000 enrolled in it, only some 5% completed it. So, while the math and programming pyrotechnics can and do get daunting, old-school non-digerati can and should understand the processes to their extent possible.
As an example, a simple Excel algorithm trading system to generate signals when a “golden cross” (50-day average exceeds 200-day, with a minimum activity level) occurs can help traders follow hundreds of instruments, a basic tenet of diversification. But while the simple strategy itself may have but a few lines of code, the work of testing and implementing those strategies can be laborious.
Other Algorithmic Trading Tips for Forex Traders
For other algorithmic trading tips for Forex traders and investors, we refer to sites like Rizm and Quantopian. Rizm allows you to easily build and edit algorithms with a drag-and-drop interface. While, Quantopian helps you code and rewards you for profitable ideas. Ideas and help are also available in the more traditional community-type online forums and Twitter feeds as well as in academic journals.
In any event, going it alone is a process requiring strategies implemented by tools. The first threshold is your data. At no cost, you can access most exchange daily and historical settlement data for volume, open, close, high, and low prices for all their product offerings. Of interest to FX traders are the CME FX Products, USForex and ECB Data. Some data vendors provide more than mere data feeds. Such as tools like charting platform and other analytics for rule implementation to generate buy/sell signals etc. A trader can connect the platform with his broker’s platform via an API for more seamless execution. Financial data vendors like industry-leaders Thompson Reuters and Bloomberg – each with some 30% of the market – can also provide data streams compatible with different brokers and charting platforms.
What makes DIY algorithmicists successful?
Employing charting platforms to apply different techniques and chart-based strategies is the key element for the successful DIY algorithmicist. This process aspect includes devising and coding of these techniques and strategies — the most rarified part. Finally, choosing the most accommodative broker is the final puzzle piece.
Of course, uber-algorithms remain the domain of the well-healed financial titans with only misfiring entrails visible to the hoi polloi. As we discussed in the Forex stop-loss evaluation previously, one of such misfiring was the October 2016 Pound flash crash. The incident occurred in the pre-dawn illiquid “twilight zone”, before the Asian opens. The most proximate causal factor was likely marginal comments thousands of kilometers and many time-zones away by French President Hollande calling (again) for a punitive EU stance relative to Britain’s exit negotiations. Instantly picked up and broadcast by the Financial Times, the sell-cycle was set in motion. With sophisticated financial trading platforms now using Bayesian methods and vectors for representation of words – in a near-lifelike replication of an analyst – the Sterling short and overshoot was a logical conclusion.
So as we knew, even without DIY algorithms, mice must tread carefully where elephants rumble.
About Xtrade
The algorithmic trading tips for Forex traders and investors was provided by Xtrade. Xtrade is an award-winning brokerage that offers CFD trading on stocks, indices, commodities, and currencies. Its cutting-edge technology, available on both desktop and mobile devices, includes five digital trading platforms. These are accessible to traders across Europe, Asia, and Australia in over 40 languages. The company also offer a sophisticated trading education centre, real-time financial news, and innovative trading tools. Xtrade’s Global Ambassador is Cristiano Ronaldo of Real Madrid, who features on the company’s digital hub. Xtrade is regulated by CySEC, the EU’s Markets in Financial Instruments Directive. But also holds the Australian Securities and Investment Commission, and South Africa’s Financial Services Board licenses.