Trading Algorithms?

Beginner Questions
1

In the past, I’ve often used basic programming languages, such as PHP and Python, to help with school work (mathematics, mainly). Though simple, developing these algorithms has brought me more enjoyment and satisfaction than most other things I’ve done in the last year.

I’ve also started learning forex; I have no knowledge of any other financial market. I’m still very much at the learning stage in my experience with forex - I now feel familiar with the tools available to traders, but I do not feel at all familiar with the market itself. Again, I’ve loved learning this.

I’m now wondering about trying to create algorithms to trade forex. Brief research has revealed that I am able to use MetaTrader to develop ‘expert advisors’ using MQL. Is this the best way to trade algorithmically, or are there better alternatives?

Also, if the majority of trades are based on technical analysis, why have algorithms not replaced human traders all-together? Are the typically less effective?

Any advice for me, based on this?

Thanks

2

There are plenty of companies as well as individual trader who use algorithms for trading so it is by no means a new idea. Most trades are conducted by computers while the better outlets conduct them under human supervision.

3

I’m aware of the fact that’s certainly not a new idea, and I wouldn’t run an algorithm unsupervised if I were to do this. I was just asking for advice as to where to start and what the best platform would be.

4

  1. It is very hard to impossible to code concepts that work. Humans are so much better at pattern recognition than computers.

  2. You can make a profitable EA, but the edge is always going to be small. Ok-ey, I presume one can put zillion restrictions to get good entries, but how are you going to tech it when it is a good time to exit trade? There is no universal exit strategy or R:R and there is a lot of randomness in the market anyway. In the end - no matter what you do - your exits are going to be pretty random.

5

This is great! Been waiting for a new algo trader to join the ranks xD.

Little bit about me. My name is Benjamin, I’m 23 and I have been writing algorithms to trade Forex Since basically last April. Do not let anyone on these forums try to belittle what you are interested in that’s the first piece of advice I have for you. What exactly do I do? What platform do I use? To get a better understanding of exactly what I do check out my post in my trade journal located right here:

–> 301 Moved Permanently

Make sure you are on page 14 and read that long post I have at the top. I explain exactly where I am at algo wise!

I explain exactly what I do, just not the exact specifics of how I trade off the statistics I use do to the fact that I am still learning this part.

the system I trade I use to predict the overall master direction of the day I intend on trading. Basically I want to know if the EU for example is going to close long or short on the day candle. After I determine the direction, I enter at the day open and hold the trade until the day closes 24 hours later. This style has huge potential to make insane profits (several days I have made well over 100 pips in a single day).

First of all, I use Microsoft Excel for my system. I do not have an EA built yet for what I currently trade… I feel my system is too advanced for me to write an EA for just yet considering I would have to learn everything about programing. Why do I use Microsoft Excel? Microsoft Excel is the perfect software to use when conducting statistical analysis with a large database. I’m a complete noob, but I taught myself how to write the functions I use with little or no effort. Google has been my best friend when I needed help trying to figure out how to accomplish something I didn’t know how to do. I even learned how to color code the cells and whatnot xD (can be very useful believe it or not).

How do I use excel? My system is pretty simple yet very, very advanced at the same time. Basically I pull all 1440 minutes of the previous day to the day I trade and past that data into my custom made Microsoft excel spreadsheet. Since all the algorithms are already programmed into my spreadsheet, by me of course, it’s as simple as copy and paste… scrolling down to where my main equations are, and then making my informed trading decision. Takes me literally less than 20 seconds at night to go through this whole process and place my trade before I go to sleep.

What data? the “data” I use I get from my trading broker (Oanda) under the history center for free. I simply download it each night (it’s a very small file and it automatically opens in Microsoft Excel). This data consists of 7 columns of primarily numerical information: Open, High, Low, and Closing prices as well as volume for the specified time frame you want. Like I said I use 1 minute information primarily, but I also use Hourly data as well. The remaining 2 columns of information they give you are the date and time for each set of prices and volume. If you are using mathematics like me, this data is the holy grail and the possibilities are endless.

To give you some ideas that are pretty simple to calculate using this information… Have excel tell you how much each candle stick moved for the specified time frame data you downloaded from open to close, how many candles longed? How many candles shorted? What was the avg. long candlestick movement? What about short candlestick movement? Etc. The possibilities are endless.

My very first system I traded off of how many hours sold and how many hours longed paired with the difference in how much the market moved long or short. Very basic right? I have since graduated to much more in depth system of course (check out the link above). If you are interested feel free to message me if you have any questions.

Someone else posted EA’s only have a slight advantage etc. I agree with that statement to an extent… It really just depends on what kinda system you are trading. However, my trading style is me paired with my statistics, not just my statistics. So I have a mixed human + machine trading style… which I think is one of the most lethal combinations when it comes to trading! Lethal as in advantage when it comes to trading :wink:

Hope this helps, and keep up the determination… It might take you thousands of hours like me to finally start getting the hang of things xD.

6

Thanks, this was exactly the sort of answer I was hoping for! I agree with what you’ve said about the combination of human and machine ‘intelligence’ having the most potential - both have their own distinct advantages that compliment one another very well. I should be starting a 4 year mathematics degree in a few months time, and I’m hoping that this time will offer a good opportunity to develop some algo’s - I quite like the idea of trying to develop something to gauge changes in momentum, and I feel that this sort of approach lends itself quite well to automation. I’ve subscribe to your trade journal and look forward to seeing how you get on.

7

Sounds great man. I have been considering getting a mathematics degree as well! If it’s momentum you are interested in, I may have some pretty interesting stats you might want to look at. I was trading off momentum based concepts for a while and have since moved on, but then again I haven’t spent a great deal of time studying them. Buy and sell cancelation and non cancelation rates xD.

8

Algorithmic trading is rising exponentially and contributing a higher share in the market. And yes, there are quite a ways to algo trade with many platforms available. I learnt algorithmic trading from an institute called QuantInsti, that is when I got to know about different ways and means to perform algo trading.