In the previous article, we talked about a general trading plan and the differences between the trading plan and the trading strategy.
Here we are going to talk about the trading plan to operate automatically. Even if we operate manually and automatically the same strategy, the way of operating changes, and therefore the planning is different. This article can also be useful if you do semiautomatic trading.
Tools
Strategy creator
An automatic trader is going to need, from the base, a solution that allows him to implement his algorithms (going from the idea to an information system). About this topic, we will also talk in this article.
Strategy validations (backtesting)
Backtesting is essential since any automatic trader is going to launch their automatic systems without having an idea of how they work. It is essential to have a software that allows you to validate your trading strategies. The most common backtesting platforms, as Metatrader, carry out the backtesting in your laptop, which will mean:
- Having an information system that has sufficient resources to do backtesting.
- Finding, managing and working on historical data to upload it in the computer.
In tradEAsy we offer a backtesting tool that will not rely on your PC and you will not have to worry about historical data because al will be done in the tradEAsy servers with quality data at a tick.
Automatic trading platform
In this point, you are going to use a platform that allows you automatic trading. You have to choose your favourite platform and later the broker that offers it. Other have a broker or a list of brokers and from there analyse the platform trading platforms.
Trading platforms more known:
- MetaTrader 4 & 5 (tradEAsy generates systems for MetaTrader 4).
- NinjaTrader
- Visual Chart
- PRO Real-Time
Once we have the materials ready we can start to plan our trading plan to operate automatically.
Trading plan parts
Objectives
We must have the objectives we want to achieve on automatic trading clear. “I want to make a profitable and consistent system”. “I want to have a valid strategy for multiple assets”, or “I want a trading strategy portfolio that diversifies the risk”, etc.
Time availability
We have to know how much time we can devote to automatic trading. Automatic trading indeed reduces to 0 the time devoted to market operations, but we have to consider that planning, verifying and monitoring strategies takes time.
Set up a working time in which you have free hours to elaborate and validate trading strategies. That can be in the closed market (holidays, for example) since we are working with historical data.
Trading type
On one hand, you must decide if you are going to do automatic or semiautomatic trading.
In both scenarios, you must define, validate and activate the strategies, but moreover, in the semiautomatic system, you must be available to execute opening and/or closings when you receive the automatic alarm.
Decide what trading type is more suitable for you, and once you have it clear, be consequent with the decision (it is not recommendable doing manual actions if you have decided to do automatic trading).
Operation type
At this point, the fundamental thing is to know the type of operation we are going to carry out. In automatic trading is indifferent the free time you have to make a trading type short/medium/long term since the operation will be done by the automatic system. However, you must take into account your availability for semiautomatic trading, since at the moment you receive an alert you should be available to execute the orders.
Learning
The automatic trading learning can be distinguished in two modalities:
- Theoretical learning: This is all the information you can read in blogs, books, automatic trading courses.
- Practice learning: Through backtesting, an automatic trader can learn so much in a short period of time to evaluate the repercussions that different strategies have in the market.
Establish a learning plan that helps you learning new concepts as you take the most of backtesting to learn meanwhile you validate your strategies.
Work methodology
We must think in the routines to follow in automatic trading. Considering all the steps, one should define the available time. For example, a person can plan to define a system in a weekend, during afternoons validating and redefining the system with backtesting, and the following week implementing it. Finally, take a dynamic between system monitoring of the ones already functioning and incorporate and distribute other systems.
This is the two fundamental aspects that you should have to plan your automatic trading. Do you have into account any other aspect? Tell us about it in Telegram.