Basics Of Algorithmic Trading That Every Trader Should Know


One of the big mistakes that people make about trading the markets is that they believe that they have to be doing something original or indeed very clever in order to make money from the markets. This really is not the case. In fact, in many ways, it is the exact opposite.

The basic concepts that are being used today by both small home-based traders and bigger funds are pretty well exactly the same as they were 40 years ago. For instance, breakout strategies were being used by Richard Donchian in the 1920s and were subsequently used by the famous turtles in the 1980s and are still being used, in one shape or another, today. So that the basic concept has remained valid for pretty well 100 years.

One simple concept or bias that you can use immediately in your own trading on the indexes is to simply trade the volatile days. Most of the time the market is meandering a little up and then a little down and making no real progress. However, occasionally some big news event occurs or change in sentiment that leads to much more dramatic movements in price. This increase in volatility is a tried and tested sign that price is likely to continue to move in the direction of the volatility breakout for some time to come. One of the simplest basic rules I’ve ever come across for trading the indexes is to simply enter long on the big days.




In other words, with the S&P 500 or indeed most other indexes, you may choose to enter long-only on those days where the market gains say 10 points over the opening price. You would then exit the trade at the say the end of the day. Many would say surely this is far too simple a method to work today in the modern markets but try it and you may be pleasantly surprised. Once you have a basic concept like that which shows some positive edge positive or expectancy it is simply a question of trying to improve the performance and smooth the equity curve by using a few other filters to try and eliminate some of the low expectancies or losing trades.

The big advantage of attending the best quality algorithmic trading course is that they should provide you with many of these well-known biases that you can then build upon in your own trading. For an individual to discover perhaps 10 similar biases for index markets could take thousands of hours of computer research but if you attend a quality algorithmic trading course that same information can be contained on just a few pages of material.

This will save you thousands of hours of research and having to read through dozens and dozens of textbooks. Good quality courses will also not just give you a list of biases but they will also give you several fully functioning fully formed fully proven algorithmic trading systems that you can immediately plug and play. Again this saves the student hundreds of hours of research and testing. It really is a question of how much every hour of your time is worth.

Even if we take the highly optimistic assumption that you would need to spend 1000 hours on research to identify tradeable biases in the markets and assume that you value your time and even just $10 an hour that means it will cost you $10,000 to maybe discover these biases by your own endeavors. Conversely, good training courses are available for just a few thousand dollars so the cost benefits of attending an algorithmic trading course are really quite overwhelming.

It really is a question of just how highly you rate your own time and how confident you are that you can discover these keys through your own research. For more information visit our website! http://pro-trader.co.uk

Location: International House, 24 Holborn Viaduct, Holborn, London EC1A 2BN, UK

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