This is the era where most financial traders are interested in algorithmic trading but cannot code their trading robots. Here, Andreas Polycarpou shares great insights on how traders can code their algo trading robot.
What is an algo trading robot?
In its simplest form, an algo trading robot is a computer program. That is a line of codes that can create and perform buy and sell functions in financial markets. Algo trading robots mainly have these components:
- The entry rules that implement the buy and sell signals
- The current position & position sizing rules that define the quantities to buy or sell
- The exit rules that signal when to buy or sell
The Essential Tools You Need for Coding your Algo Trading Robot
According to Andreas Polycarpou, for any algo trader to effectively code their Algo trading robot, there are some essential tools they have to work with. The first set of things you have to have in your possession include a functioning computer that runs either Windows or Mac OS and internet connection.
With the computer, you have to run an electronic trading platform, for example, MetaTrader 4 (MT4) a spectacular coding trading strategy platform that uses MetaQuotes Language 4 (MQL4).
Designing your Algorithmic Trading Strategies & Preliminary Research
At this stage of coding your algo trading robot, Andreas Polycarpou emphasizes the importance of reflecting the must-have characteristics of each algorithmic trading strategy. Some primary consideration on the strategy you are to consider include:
- Fundamental Analysis
- Technical Analysis
- Statistical Analysis
- Macroeconomic news
Whatever influences your algo trading strategies must be market prudent. That is, its basis must be sound economically and market-wise.
More importantly, you should also conduct preliminary research that will help you focus on coding a robot that compliments your traits. These include things like your available time for trading, trading capital, and personal risk appetite. Other essential steps in coding your algo trading robot shared by Andreas Polycarpou include:
- Backtesting your code to validate the trading robot
- Optimization of your algo-trading design to maximize the performance of the robot
- Live execution of the trading robot with real money to ascertain if it delivers the same quality of performance detected during the testing stage.