Hi, i trade currently for a prop firm. Im learning alot about how the market works etc...So im interested in learning more about this automated trading. How does it work? Can you just design your own program and then license it to go through a broker? Or what other options are there? I don't really have much of a knowledge in programming (a little java) but willing to learn if needed. What languages are best to learn for designing fast and efficient programs? Any help/advide would be appreciated.
Basically the idea is to create a mechanical trading system, something that your computer can do without any input from you. A simple example of this is to buy a stock when it crosses above its 15 day moving average and sell when it crosses below it. If you use a broker that supports an Application Programming Interface (API), you can write a program to interface with your broker and send them orders. Your program would ideally recieve realtime market data from your broker and use it to generate signals, such as buy when cross above 15day MA, and send these orders to be executed. I personally use C++, but most brokers support a wide array of languages. No language really has much of an advantage over the other, it is mostly personal preference, some may be easier to design GUI with if that is important to you, for example. Generally before you move into automated trading, you want to have a solid strategy already working for you. The goal then is to convert this strategy (if possible) to mechanical terms by writing it down in a manner that a computer could understand. Since you're fairly new to the market, I would recommend that you first try to become profitable (if you're not already) before attempting any form of automation. I am by no means saying you should stay away from it, learn as much as you can, it has piqued my interest for a long time now and I have just started developing my own automated platform and it has been tons of fun. Good luck to ya, hope that helps! -- Paccc
Thanks for the reply. Im mostly into daytrading and scalping. I have a list of simple strategies i have developed (based on level2 and other indicators). Is there any problems with using automated trading for very short term strategies or does it work equally well depending on your style?
It can work equally well no matter what timeframe you choose, it only depends on your ability to correctly define buy and sell points. If you want to try to do it for your strategy, it would have to correctly evaluate the Level II screen and make its own decision based off of that. I don't know what your style is, so I don't know exactly what you look at or how hard it would be to automate it, but generally strategies involving scalping would be a lot more difficult. You would have to additionally record the market depth for each security you trade and generate signals based off that and any other indicators you use. If you get it to work however, you would have a significant advantage over other scalpers since your trades can be placed and executed much more quickly than those who are manually inputting them. -- Paccc