Friday, 14 October 2011

Why Algos? Auto? Hybrid?

The chart and stats below are my morning DAX trades, reduced to a 1 lot basis.

This is why I why I advocate algo trading. All the smarts went into designing the TP and converting my trading rules into the algo. Not a big deal in Easylanguage or RTL or a host of other pseudo languages.

If you look at the third trade, the losing trade, you can see what the difference would be if you hybrid traded this trade: NOTHING. I don't think that I would have traded this differently had I wanted to maintain the trade targets I had on the winning trades. Had I shortened my targets for all of the trades, I would have had more entries and exits and I would have avoided much of the 556 Euro loss on this trade. But I would have had to pay attention and maybe I would have missed exits or otherwise mucked up the trade.

Choosing between fully automated and hybrid trading is a calculated choice. Lots to be said for both ways of trading. However, I mitigate many of the downsides of autotrading by how I design the algo and how I conduct and manage my optimisations. Knowledge transfer of this information and techniques is one of the purposes of the November Workshop.

Everyone who has signed up, start thinking about what you want your algo to do. What frequency of trades, what win rate, what max drawdown, and any other stats that are important to you. I will help each attendee to build an algo that meets their requirements so knowing what you want is the first step. Just saying "I want an algo that makes the most money" won't cut it because it may very well be that you cannot trade THAT algo as its negative performance metrics are unacceptable to you. The algo has got to fit the user.

No comments:

Post a Comment