I have evaluated and used several platforms for automated trading including TradeStation, NinjaTrader, MetaTrader, and RightEdge Systems. I’d like to share my opinion regarding these. Probably the most popular out there is TradeStation. I primarily used TradeStation to automate my Forex strategies. I also used it to trade the S&P E-mini, but that system wasn’t automated. Writing programming code to automate a system on TradeStation is much easier than other platforms. TradeStation uses a language called EasyLanguage. I used to program in Pascal years ago, and the syntax is very similar. TradeStation does a good job by trying to make things as easy as possible for development and backtesting. One huge advantage of this platform is that you can actually call and get live help. If you post on their Tech Support Forums, you’re likely to get quick results. Most likely your question has already been asked, so you can just search. The disadvantage to TradeStation is that it costs more than the other systems that I used. Although you can usually find a special deal to get a month or two free, it was costing me $100 a month to use it afterwards. Plus, you have to pay for your data feeds with the exception of Forex. With Forex, not only do they charge you the spread, but they also charge you a commission. Most brokers charge the spread only.
NinjaTrader will allow you to use their platform for free to develop and test your strategies as long as you’d like. However, once you want to go live, you have to pay. At the time, it’s about half the monthly cost of TradeStation. NinjaTrader is slightly more difficult to program in since it uses C#. However, they do have a GUI that will allow you develop your strategies without any coding. Unfortunately, not everything can be done through their GUI - but quite a bit can. NinjaTrader also has a support Forum with very quick replies to questions. However, there is no tech support line that you can call for questions. I guess this is how they keep their costs down. I’ve also used the NinjaTrader platform to trade discreationary systems. The platform is worth checking out.
Unlike TradeStation and NinjaTrader, MetaTrader is used for Forex only, and it is 100% free for development and for live trades. It is a very popular platform for Forex users and you can find quite a few Expert Advisors and Indicators for free on the Internet. You can of course program your own, but the language is a little more difficult than TradeStation - MetaTrader is basically C++. I currently use MetaTrader for automating Forex systems.
RightEdge Systems is similar to NinjaTrader and is also around the same cost. It is definitely worth checking out.
If you want to get started with automation, you can find online help for TradeStation, NinjaTrader, and MetaTrader for free. There’s quite a bit out there. I will post some links in a future post.
After learning the functionality and syntax of each system, I bought a very good book that had some great strategies. One of them I still use to this day with some minor modifications.
The book is called Building Winning Trading Systems with TradeStation. Although this book was written for TradeStation, they describe the strategies in enough detail that you can convert the pseudocode to other platforms for back testing and forward testing. If you already have TradeStation, they give you a CD with the code that you can use to load and test within minutes.
1) Before trading with real money, wait until you have a system or strategy that you’ve backtested and forwarded tested successfully. If you are trading without a system/strategy, you are just gambling. I’ll show you examples of systems/strategies in future posts. Yes, this is easier to do with an automated system, however, it is also possible to backtest discretionary systems/strategies. It just takes a little longer. Remember this: It is not ok to blow up your first account.
2) Once you “think” you have a strategy, trade with a small fraction of what you have. Trade very small. Forward testing with papermoney is different than forward testing with real money in my opinion. It’s a psychological thing. If you are successful with a small amount of money for a few months, then try adding a little more. If you aren’t successful, then go back to step 1 and refine your strategy or come up with a new one.
3) Do not believe everything everything you read on the Internet. For example, people selling “strategies”. Most people selling systems/strategies are making more money by selling the system than with the system. These systems need to be backtested, but more importantly forward tested. Some sites do have forward testing results. I’ll talk about these later. I’ll also discuss why you have to be very cautious of backtesting results.
4) Don’t believe all the talking heads on TV. For everyone saying go long, there’s another saying go short. Try to listen to both sides if you insist on watching.
5) Don’t believe everything you hear at a seminar. Be careful of paying anything or buying anything during a seminar. Do as much research outside of the seminar as possible.
6) If you insist on trading Forex or Futures, be very cautious. The leverage available can wipe you out real quick if you don’t have proper money management or a proper strategy. There’s a lot of advantages of trading Forex, but there’s a lot of disadvantages as well. Yes, it’s possible to make money with it, but without a proven system, you could easily lose it all. Money management is the key to trading everything, especially Forex and Futures. The leverage available in Forex wipes out most traders.
I’ll continue to add more things to consider in future posts.
SPY as of 11-28-2008 close
The image above is the SPY (S&P 500) as of the 11-28-2008 close. As you can see the stock market has had a very nice rebound since hitting a fairly recent new bottom 1 week ago on Friday. The market has had very strong rally. It may appear that the market has hit “the” bottom, however, some of the biggest and most powerful market rallies are during bear markets. The market has a way of sucking people in just before spitting them out again. It could be time to go long, but I don’t trust it. I am going to wait and see if it bounces off the trendline I drew above. If it breaks above it to the long side, I still recommend to proceed with caution. Volume was also very light today - which was very expected since it’s the day after Thanksgiving. Nothing has really changed for the better fundamentally as well. Next week, we’ll also have some very important economic announcements that will need to be watched carefully.
In future posts, I’ll show you how I would trade this set up using Options. I need to establish a base with some more postings before I start going into strategies.
I originally started trading using discretionary techniques which include a combination of technical and fundamental analysis. It took me a while, but I eventually discovered that in order to be successful at trading, you need to have a system that you can backtest and of course forward test. You can do this using discretionary techniques, however, one may argue that it is better to do it through mechanical systems trading. Each have their pros and cons. I personally think there is a place for both, and I actually do both, but most of my trades are discretionary.
I’ll start the discussion of automated trading or mechanical trading in this post. Automated systems take a long time to develop, but once written, they can be backtested fairly quickly in comparison to discretionary trading. Within minutes, you can backtest years worth of data and see your equity curve line to see if it’s profitable. Efficient backtesting is a huge advantage. One of the biggest advantages of automated trading is that you can remove your emotions from your trades. Most traders lose due to greed and/or fear. If you can eliminate these, this can be a huge advantage.
Some of the disadvantages of automated trading include: 1) coming up with a set of rules that will work and then learning how to code these into the particular platform language that you are using, 2) things can go wrong with the system that you didn’t account for or never considered, 3) there’s no way to know if what worked in the past will continue to work in the future – was enough backtesting performed?, and 3) was the backtesting curve fitted?
Tomorrow, I will continue the discussion and also talk about some of the automated trading platforms that I used.
Next Page →
Forex Megadroid™ Indisputably Proves A
Robot Can Trade With 95.82% Accuracy In
EVERY SINGLE Market Condition And At Least
Quadruple Every Single Dollar YOU Deposit.
