Boris Fesenko

Transcript

1. New models and methodologies: taking your automated FX trading to the next level By Boris Fesenko, BJF Trading Group, Inc. Popularity of automated trading systems has been constantly growing throughout the years. On the one hand, the reason of such popularity is that an automated trading system allows a trader to generate more trades (a robot allows to analyze more trading instruments and timeframes simultaneously) and excludes the psychological factor when making decisions. On the other hand, automated trading is popularized by brokerage companies and developers of trading platforms and trading systems. Traders constantly improve their automated strategies: they make changes in their algorithms, optimize them, and add new filters; they also buy different trading strategies from third-party developers and make a strategies portfolio; sometimes they “rent” trading strategies from third-party developers and make a portfolio. The notion “rent” implies not only monthly payment for using a trading robot but also subscription to signals or membership in social trading networks. There are certainly many ways for traders to attain their trading goals. But there are three popular methods advanced and less experience traders can use to leverage an automated signal copier. USING AN AUTOMATED SYSTEM DEVELOPED BY A THIRD PARTY This is the easiest path towards trade automation, as it entails copying a trading system created by a third party. This is also a potentially profitable method and it is common to see many public trading systems consistently posting profitable statements. Even then, the contentious issue with these systems is the lack of certainty that the third party developer has created a program that will not constantly lose you money. This is one of the major reasons why many a trader is hesitant to use third party automated trading robots. Ideally, traders should look out for systems that come with a clear description of the strategy – how it works, whether it trades ranges or trends, whether the strategy is long term, medium or short term, what the win rate is and what risk and reward ratio the system offers. The more information the third party developer offers, the better the trader will be at choosing an appropriate trading robot. Of the many trading programs on the market, many are of superior quality, but few are inadequate with scarce benefits and features, especially for the beginning trader. Many providers of third party automated signal 166 | july 2014 e-FOREX july 2014 e-FOREX | 167 AUTOMATED FX TRADING AUTOMATED FX TRADING Boris Fesenko 2. copiers claim more than a 95 percent winning rate. Even then, the most viable programs provide a certified trading history to reveal the effectiveness of the trading system. However, profitable profit/loss statements do not guarantee future results with any given system. WORKING WITH AN ADJUSTABLE TRADING STRATEGY This method of automated trading is more difficult than just copying a third party trading system. Traders who are looking for a trading system that works efficiently but can be improved upon will typically gravitate towards this method. Sometimes, a strategy might have great entry logic but a trader might want to change stop-limit levels used in a specific strategy. At other times, a trader may also opt to change the moving average to a level that they are more at ease with. A lot of public strategies are customizable from the sub-account, allowing the trader to adjust features such as currency pairs, stop-limit levels, indicator settings, among other parameters. It is recommended to backtest third party strategies for optimal results. Well-known automated trading programs are compatible with all major currencies. The pairs that demonstrate the greatest liquidity include USD/JPY, USD/EUR, USD/ GBP and USD/CHF. Regardless of the currency pairs utilized, trading strategies differ greatly ranging from risk-averse systems that are designed to scalp a couple of points, to more risk-prone strategies. Traders can adjust the baseline strategies and keep those that work for them. Whether you use a fully third-party system or a customizable program, your needs as a trader is an important consideration. Needs such as ease of use, programmability, 168 | july 2014 e-FOREX functionality, and speed are essential considerations. Intermediate or advanced traders may prefer a system that features market specific orders, trailing stops etc. On the other hand, beginner traders may only require an easy to use program that they can just plug in and play without much input from the operator. ESTABLISHING YOUR OWN AUTOMATED TRADING SYSTEM A commendable way to leverage your own winning strategy is to automate it so you can apply it around the clock on all similar trades. Obviously, creating a trading system from scratch is difficult and time-consuming but if your system is able to generate profits, then the resources spent will be offset. A good number of traders often use the services of a programmer to create an automated trading system that automatically trades for them. When creating your own automated trading system, it is recommendable to factor in the issue of remote accessibility. Traders who travel frequently should work with a program that permits easy functionality and access from any location. Web-based systems are ideally suited for roaming traders. Virtual Private Server hosting provides super fast access to the program and isolates the trading system for security purposes. Social trading networks or signals copiers can be organized within the bounds of a single Forex broker or be multi-broker. Realization of copying within the bounds of a single broker is done on a server-based or manager-based API. The advantages of such copying are high copying speed and absence of necessity to keep a trading platform launched. The only shortcoming is limitedness of a system by a single broker. Multi-broker copying can be organized on Forex expert advisors or scripts. There are several things to pay attention to when choosing a New models and methodologies AUTOMATED FX TRADING A good number of traders often use the services of a programmer to create an automated trading system that automatically trades for them. 3. trading system for copying. As a rule, there should be the parameter “Duration” in any social trading network. If a trade lasts lesser than one second or several seconds, it’s more than likely that problems will occur during copying. A delay between order opening time on a master-account and a sub-account depends on master-broker execution time, internal delay of a signals copier and sub-account execution time. Many scalping strategies can be destroyed by 100-200ms delay, but even 10-20ms delay is significant for several systems, for example, spike-trading systems. A technology of order interception on the stage of sending an order from a terminal to a master-account server (stp add-on) is used in some copiers for scalping strategies copying, but even in this case the results on a master-account and a sub-account may be slightly different due to master-account and sub-account execution time difference. TESTS We conducted a series of scalping strategy copying tests using orders interception and standard copying methods. First of all, we measured 170 | july 2014 e-FOREX ping between our VPS server located in Germany and a broker server. Ping average value is 100ms. It is a significant delay and I would recommend choosing servers near the broker server or even servers located at the same data center (30- 50ms) when working with scalping strategies. The next step was to measure orders opening delays. There are several stages between you pressing a button or an expert advisor sending an open order command and actual order opening: 1. A trader or a robot initiates order opening on a terminal; 2. An order is transmitted to a server via internet; 3. The server accepts the order; 4. The server sends a request to a liquidity provider via the bridge and internet; 5. The liquidity provider approves opening via internet and the bridge; 6. The order is opened on the server; 7. Order opening confirmation is sent to the terminal via internet. We received the following delay values: 1. The delay between the stages 1 and 2 is almost 0; 2. The delay between the stages 2 and 3 is 50ms; 3. The delay between the stages 3 and 6 is 40ms. This delay depends on technological solutions of a broker. The delay may be significantly higher if there is no cross-connection between a liquidity provider and a broker server. 4. The delay between the stages 6 and 7 is 50ms. I.e. the full cycle of order opening on a master-account took 140ms. When copying an order to a sub-account of the same broker without interception, the order will go through the same 7 stages and the difference between order opening time on a master-account and a sub-account will be 140ms. Price may change for several points during this time. When using interception systems (stp add-ons), an order is intercepted on the stage 1. If a master-account and a sub-account are at the same broker, the delay between order opening on a master-account and a sub-account is 0. If accounts are opened at different brokers, a small delay or lead (an order will be opened on a sub-account before opening on a master-account) is possible. It is believed that delay does not have significant influence on copying results in case of a large number of orders because price changes that both reduce and increase profit may occur during delay. It is a wrong opinion. Delay will almost always have a negative effect on a strategy when copying scalping strategies. It is also possible to copy an order from a small drawdown. Let’s say, if New models and methodologies AUTOMATED FX TRADING “Many scalping strategies can be destroyed by 100- 200ms delay, but even 10-20ms delay is significant for several systems, for example, spike-trading systems.” 4. a copying system allows adjusting a filter to open an order on a sub-account with 2-3 points drawdown, such approach will allow to compensate losses caused by order closing delays and get sub-account results similar to master-account results. On the other hand, some orders opened on a master-account won’t be copied to a sub-account if price moves to the predicted direction right away. You should analyze historical data and choose filter values (i.e. drawdown values) in such a way that the number of missed orders wouldn’t exceed 3-8% from the total number of orders. When copying multi-currency orders, copying from a master account where several systems (robots) operate, or copying from several master-accounts, it is necessary to analyze each currency and strategy. 172 | july 2014 e-FOREX A copier may have built-in filters on a currency pair, magic number, comments. Such filters allow forbidding copying on undesirable currencies and exclude a strategy that does not meet your criteria from copying. Filters and orders interception systems are usually not used when copying in social trading networks, but only in trading copiers. If a master-account and a sub-account are opened at different brokers, you should compare spreads and delays during operation of a strategy. The most effective method is to copy strategies that use pending orders. Only in this case you can reach full correspondence of opening and closing price on a master-account and a sub-account. The next stage of preparation to the copying process is calculation and adjustment of risk and a lot scaling method on a sub-account. In case you trade with a fixed lot on a master-account, everything becomes much simpler. In this case, a lot scaling coefficient is often used. I.e. a lot on a sub-account is calculated by multiplying a master-account lot size by a given coefficient. But a strategy may have a complex money management system. In this case, use of the scaling coefficient may lead to violation of the system ideology. There are methods of lot calculation on a sub-account depending on master-account balance, sub-account balance and lot size on a master-account. Master Lot Size * (Slave Balance / Master Balance) * Ratio (risk) THE KEY TO SUCCESS Preparation to copying may seem to be a very complex procedure, but the stage of preparation and preliminary analysis is the key to success. Obvious as it may seem, a feasible signal copier should be able to copy from several master accounts to multiple slave accounts if the benefits of trade copying are to be fully realize. The most viable trading robot system must have proven trade-reversing options, which the trader can easily customize. Additionally, the best automated systems should have a convenient provision that enables traders to amend profit and loss stop levels as well as multiplier levels when necessary. An essential aspect of preparation and preliminary analysis of trading robots is the ability of the operator to choose specific currency pairs. To leverage the full advantages of the system, the operator should also be able to forego any currency pairs that he is not willing to utilize. The ability to copy signals to multiple traders is of essence as is the system’s compatibility with all types of brokers. New models and methodologies When creating your own automated trading system, it is recommendable to factor in the issue of remote accessibility. AUTOMATED FX TRADING 5. Products described in article www.programmingmt4.com TRADE COPIER SOCIAL TRADING Platform based on EAs To schedule a presentation sent a request to: support@programmingmt4.com SOCIAL TRADING Platform based on manager API SOCIAL TRADING Platform based on EA and API PAMM Used by Money managers Signal providers Traders Independent business as a Multi broker solution Forex brokers Independent business As Multi broker solution Forex brokers Used For Manage multiple accounts FX Signal service. As Stand along, independent platform for Social Trading business Added value as Social Trading platform where newbies can follow experienced traders As Stand along, independent platform for Social Trading business Added value as Social Trading platform where newbies can follow experienced traders Benefits Instant set up Works with different brokers Ready to be installed Works with different brokers Almost instant execution No interruption with server plugins Driving new clients to broker Works with different brokers Recommend brokers connected via API Driving new clients to broker Execution Instant. Depends on Internet connection Increased via STP add-on Delay

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