Trading with Algos: Where to Start

The title of this blog post reflects the issue that most traders have if they have yet not started using algos to trade. I say "yet" because I believe the switch to algos from discretionary will become almost inevitable for most traders.

Having made such a bold statement, let me show why I believe it to be true.

1. The markets are trading more in fits and bursts. The rhythms have changed. There are more periods of inactivity and this makes it harder to maintain focus. Easy to miss the trade of the day.
2. Active periods can now be at anytime within the 24 hour clock. A trader doesn't and can't spend 24 hours at his workstation so as not to miss the trade of the day.
3. A very high percentage of daily volumes of most active markets are generated by algos. Not only are other traders' algos your competition by they create the noise that makes it harder for a discretionary trader to trade.
4. Different markets are active on different days. A trader needs to be watching a number of markets at the same time to catch the trades to make a living.

       ..........and the list goes on.

Getting back to the title of this blog post, where does one start?

If you are a coder, you can "think up" a trading system and code it. You need two skills for that: trader and coder. Not easy but doable over time. Lots of false starts and lots of time needed. Your choice here is whether to start from scratch or use a platform such as NinjaTrader, MultiCharts or the likes.

If you're not a coder then you have different options.

• Are you an experienced trader that already has a system and can get it coded by someone for one of the platforms? This can be quite a difficult and expensive option. Firstly, defining the strategy for someone else is not that easy. Secondly, you are spending money on something that probably won't be profitable (I say this from experience). One good option here is to buy programs from Sharkindicators that alows a non coder to create a trading system. This is a viable solution if you have a trading system that you want to automate.
• You have no idea of what a robust (going forward) strategy should be even though you can trade as a discretionary trader. The algo has rules not discretion. In this case you can either buy an algo that is commercially available or you can use one of the several applications available can create and test trading systems without you needing to know how to code. I'll post soon on this topic as its a big one.