Well the algorithm of writing trading algorithm is the following (as I see it). - Pick a set of rules according to which a trade should be executed/closed. It can be some some mix of technical indicators, price patterns TESTED ON HISTORY (the more is the better). - Answer the question: Do I want to automate it? i.e. spent time on something else, while algorithms will place orders instead of me 24/5/365. - IF yes, code it! - Test on history - If your winning ratio is higher than 60% and drawdown is low then I think you can go live.
I have borrowed the following books from the library. I guess I have a lot of reading to do. Building algorithmic trading systems : a trader's journey from data mining to Monte Carlo simulation to live trading / Kevin J. Davey. Inside the black box : a simple guide to quantitative and high frequency trading / Rishi K. Narang. Algorithmic trading : winning strategies and their rationale / Ernest P. Chan. A guide to creating a successful algorithmic trading strategy / Perry J. Kaufman.
Excellent picks I would say, last book is my favorite. Hope you will have enough patience and apply hard work to get through them, because some of them are quite challenging.
i recommend to everyone to stay away from discretionary trading. most of the price action is pure noise and crap, especially in the lower time frames. your objective should be to develop a rules based trading system that has been evaluated extensively on out of sample data and then trade your own system with absolute discipline. i posted this to another thread and it should also be of benefit in your case: if you are a novice the only platform you need to get started is ninjatrader. it is free to evaluate, works magnificently and their backtesting - optimizing engines are the best. it has everything anyone needs to develop profitable strategies in a month or less. take a look at quantconnect as well, their platform is open source, free and they also make available all the historical data you need to backest your algorithms for free. just be careful not to upload any valuable code to their servers, it is better to use their lean platform on your own computer. there are no regulated centralized foreign exchange markets so their own broker is always the counterpart to every retail trader, this and the possibility of poor liquidity at the most crucial times are enough for retail traders to stay away from these instruments. futures are a little better but their extreme leverage means those instruments should be avoided as well. equities and options are much better alternatives. i can tell you right away that all oscillating indicators are completely useless, as is the case with most of the best known indicators but anyone can learn this by themselves in a matter of days by running the appropriate backtests on the ninjatrader platform.
I would read this book: . JA knows what he is talking about and I have seen him on different events. When it comes to software there are many to pick from. If you are a Fidelity customer you can get Wealth-Lab Pro including data for free.
If you are itching to start coding, write your backtest engine. It's going to be the core of your data mining/optimization process anyway. Make sure to make it as efficient as possible, because you're likely to be running it at scale.
I find that it is great to have programming skills, it might be helpful to program your own algorithm based on your profitable strategy. So, first you need trading method that can produce continuous profits in order to program it to be executed automatically