Optimizing Algo Trading Experience

algo trading

Through our regular series of write ups on algo trading we trust that our readers are getting fair idea on algo trading, there are several advantages to build your own automated trading system so that the conviction build from your strategy helps you to sustain longer in the market, and further helps you to have an edge to increase your returns from trading.


Before one builds their own profitable system, one need to find a repeating pattern that can be exploited and preferably one that not many people know about. If one spends a lot of time watching a particular instrument, be it a currency pair, stock or index, they will probably begin to notice certain patterns repeating. These patterns are always worth further exploration to see if the pattern really exists and if it’s possible to exploit it. Algo trading has power to fully automate your trading.

algo trading

A more deliberate method is to start with a very simple trading system and explore the signals it generates in detail. It doesn’t even need to be a profitable strategy – just a simple system using no more than two to three indicators that generates at least 20 signals for every 200 bars or so.


Once a list of signals are generated they can start deciding which of them could potentially have been profitable, and which were unlikely to have been losers. At this stage one shouldn’t be concerned with exit strategies, just want a rough idea of whether a trade could have been profitable or not. It doesn’t matter if most of them are losing trades either, but it helps if one can have a sample with at least 50% winning trades.

Now it’s time to look for similarities between the winning trades and similarities between the losing trades. It’s a good idea to use a wide variety of indicators that will give an idea of patterns in volatility, volume, trading range and trend. The more creative one can be, the more chance they will have of finding unique patterns.


Algo trading software’s allows to automate this part of the process, but it’s also a good idea to observe manually by looking at each signal and the type of trading environment that preceded it. It’s also worth looking at the losing trades and seeing if they could have been faded. The objective is not to optimize the original system but to find pattern that one can use to build a new system with an edge.



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