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Algorithmic trading


If you have even a small amount of experience with live account trading, you'll certainly understand the importance of emotional stability for a trader. In essence, our emotions—the notorious greed, fear, and many others—are the main obstacles standing between us and profitable trading. But what if we entrusted the trading process to a computer? It would keep strictly to the rules of your strategy, it wouldn't put off implementing stop loss orders, and it wouldn't close profitable trades too soon... That is why funds in the billions are traded using modern algorithms, and why private traders and large financial institutions alike release their robots onto the market.

Disclaimer: FXFINPRO Capital does not provide or endorse robots for trading in the financial markets; you can order or purchase a “robot” from respective service providers while independent investment advice may be required. Trading in Forex is risk y and you may lose more than the capital invested. Past performance is not a reliable indicator of future performance.

But what is a trading robot?

The word 'robot' may not be a very good description for the algorithms used in stock exchange trading. Essentially they are just programs that analyse the market in real time and send instructions to place or cancel orders. Algorithms do not have any physical form, except for (say) your computer. So practically any user can download and install a robot. FXFINPRO Capital does not provide robots for trading in the financial markets; you can order or purchase a “robot” from respective service providers.

When you activate your robot, it can trade without a break: night and day, whenever the market is open. That way, you can be sure you won't miss a single signal that your system receives. This point should be dwelt on in more detail: your algorithm will trade according to a system, which needs to include clear rules telling it what trades to make. But the robot can also be programmed to provide you with information, rather than to trade on its own. If you do not completely trust the program, or it is still being debugged, you can trade "manually" and have the computer just do the research for you.

A trading algorithm is basically a program whose main function is to analyse the market in real time according to set parameters. These robots are further improved with each year that passes, and in recent years they have come to occupy a very large and ever-growing share of the market.

A tireless and careful worker

Getting routine work done by a machine is a great idea in itself! Just think how much time will be freed up for trading analysis, for creating more diverse strategies!

So, let's look at the advantages of automatic trading by taking some abstract, successful robot as an example. No, we shan't be publishing the source code for any algorithms, we do not provide this service; FXFINPRO Capital does not develop robots or robotic trading algorithms. Primarily a ready-made robot can do more harm than good if it is used without a certain amount of experience and basic knowledge. FXFINPRO Capital does not undertake to test the reliability of any algorithms or their performance. After all, each algorithm absolutely must be set up in accordance with your own risk management. Losses that are acceptable to one trader may quickly ruin another. Or, for instance, some programs can produce potentially positive results during a day session—and catastrophic ones over all other periods.

But if the robot is set up with a potentially good strategy for a specific instrument and a suitable timeframe, it becomes thousands of times more efficient than a human being. The frequency of trades is limited only by the speed of your connection to the trading floor. Speed, by the way, is the most important parameter for high-frequency traders. The big players now try to install their trading terminals as close as they can to the exchange's servers, and people fight for a thousandth of a second...

Speed is important

Many algo traders employed by banks and other large organizations are engaged in high-probability scalping: that is the only way to take full advantage of robots' edge when it comes to speed. But scalping the market is not at all the only way to make a profit. When you're competing in the "heavyweight category" alongside these cyber-monsters and their "big, smart money", remember that your overheads arising from commissions and spread may be significant. There are companies, though, like ours, that offer high-frequency traders a significant discount on the commission and do not broaden the spread, allowing you to trade at the exact price offered by our liquidity providers.

Sometimes you can obtain significantly better results by extending the timeframe. And, with a robot, you don't need to spend the whole time in front of the monitor: the algorithm can make trades at any time, following the plan you've given it.

A robot won't miss an important moment, and it won't be afraid to close an unprofitable trade when you might be tempted to average. You can use as many robots as your deposit and your risk management will allow. If the robots are using different signals, independent of one another, then employing several algorithms can reduce your portfolio's overall risk by way of diversification. It's as though you had a whole prop company of tireless traders all working for you—and you don't even have to pay their wages!

Where do profit-making robots come from?

We've left the most important question for last: where can you find a robot that will make money on the market, with the minimum of intervention by you? You might think nothing could be easier: there are hundreds of sites on the internet offering trading robots for sale. They're not that expensive: and a lot are even offered for free. But, as we wrote above, it's likely that you won't obtain any good results from using algorithms like these. If you put the effort in, it's possible to alter a ready-made program to fit your trading style: but you can't do it without learning at least the rudiments of programming.

And, sadly, programming isn't one of the easiest things to pick up: learning it does take time. But there is an alternative. You can order an algorithm from professionals who specialize in just this field. Doing that will save you an inordinate amount of time.

Maybe algorithmic trading isn't exactly your element—but as soon as you see the first positive results, robots are sure to become a hobby for you at least. And eventually you are bound to reach the point where you are creating automated trading strategies for yourself, testing them, and engaging in other painstaking but enjoyable work.

Disclaimer: FXFINPRO Capital does not make any statements and does not accept any liability regarding algorithmic trading. FXFINPRO Capital disclaims liability for traders’ complaints that results of robotic trading or chosen strategy do not meet their expectations.

Traders may not file action against FXFINPRO Capital trading operations performed using algorithmic (robotic) trading.

Please note also that software (robots) is provided by a third-party, therefore FXFINPRO Capital shall not be liable for any issues with service that may arise as a result of technical issues or problems of any kind.

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We would like to remind you that although trading of derivatives on margin may offer many benefits, it is important to note that it also carries a high level of risk. Please click here to read our full ‘Risk Disclosure’ and ‘Risk Disclosures for Financial Instruments & Investment Services’.

RISK WARNING: Trading of complex financial products, such as Stocks, Futures, Foreign Exchange ("Forex"), Contracts for Difference ("CFDs"), Indices, Options, or other financial derivatives, on "margin" carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading these markets, and seek advice from an independent financial advisor if you have any questions or doubts. Please carefully read our full "Risk Disclosure" and "Risk Disclosures for Financial Instruments & Investment Services". FXFINPRO Capital is the trading name of PFX Financial Professionals Limited, a limited liability company formed under the laws of Cyprus, registered with the Registrar of Companies in Nicosia, Cyprus, under nr. HE 237840 and regulated by the Cyprus Securities and Exchange Commission with license number 193/13.
The CIF license of PFX Financial Professionals Ltd has been suspended by the Cyprus Securities and Exchange Commission until the 24th of December 2016. Please click here