Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Top 10 Things Retail Traders Should Know Before doing Autotrading

1 min read

Autotrading in India is an evolving concept in india. Algorithmic trading is the use of electronic systems to enter trading orders based on algorithms which factor considerations such as timing, price, or quantity of stock.This is typically done without any human intervention. Most of the Retail traders these days looks more passionated towards learning autotrading concepts. But 95% of the retail traders lack competence in autotrading as people view autotrading as a gambling machine/black magic to make huge money in the markets. Let look into some of the essentials concepts retail traders should know before starting autotrading.

 
Essential Requirements to Build Completence in Autotrading

1)Stop using off-the-shelf indicators like Ema Cross over, MACD, 200 day moving average, RSI..etc in your autotrading strategies as it never gonna work in autotrading.

2)If you are very much passionated about autotrading try to find out the proven mathematical models where risk is controlled and let the profits run in long term. Put your efforts in reading whitepapers which discusses about mathematical models in controlling risk. Risk Analysis is more importance when it comes to autotrading. Dont put blind efforts unless you know your autotrading system likely to do. Trading a black box autotrading system is actually suicidal!

3)Try to learn some coding stuff! Learners those who are very new to mathematical models can start developing skills with amibroker AFL coding More over most of the Discount brokers trading terminals starts supporting autotrading. If you are very serious in testing complex mathematical models then you have to concentrate on applications like matlab, scilab, R Package.

4) If you are committed and passionate about developing and using automated trading strategies, read some books and do a fair amount of due diligence prior to jumping right into shark infested waters.

5)Learn Concepts like Backtesting, Optimization, Walk-Forward Testing which are the Damm essential concepts for Auto trading. Which reveals what risk is involved any kind of mathematical model.

6)In a autotrading perspective one should not be concerned with predicting the markets rather he/she should concerned with the risk and work-case scenarios. Build mathematical models where risk is controlled. One can control risk with adapting various money management principles along with their mathematical models

7)Make sure the tools you are using is the best . Reatime data play a a major role in testing and validating mathematical models. It is recommneded to stick to authorized data vendors rather than low cost data vendors where the quality and reliability of the data is always an issue. More reliable the data more you can trust your automated trading strategy.

8)Test in a demo environment before start trading in a live environment

9)Choose which timeframe you are going to adapt for your autotrading strategy. Timeframe plays a major role in controlling the risk. Generally higher the timeframe higher the risk.

10)General Technical Analysis Skills are not sufficient for playing in autotrading field. To be a pilot you need weeks and months of expertise to build competence and confidence. Similarly Autotrading requires certain mathematical skills which never comes overnight!

6)

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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9 Replies to “Top 10 Things Retail Traders Should Know Before doing…”

  1. Dear Sir,
    I am not seasoned player in the stock market. But I found that in lower time frames stoploss is lesser than higher time frame while whipsaws are more with lower time frame. That’s why I want back testing report of your ‘supertrend indicator ‘ in hourly time frame. I did mail for that , but your answer was same as mentioned in reason 9.
    Second reason is no. of trades are less with nigher time frame which also counts ( in the form of brokerage).
    I am not expert in back testing though I use Ami. Can you do backtesting of your super trend indicator in hourly time frame?

    1. @Suhas Kothavale,

      I backtested supertrend across all the timeframes the reason why lower timeframes are profitable is 8-10 consective losses in a 5min timeframe causes 30-35% losses in case of supertrend whereas in hourly timeframe 4-5 consecutive losses would wipe out 60-70% of your portfolio.

      Overnight carryforwarding risk is there in both 5min and hourly timeframes however per trade risk is very huge in hourly when compared to lower timeframes. Moreover higher the drawdown lesser that your trading system will make money in a long run.

      1. dear rajendran, i think u hv done a tremendous service to the trader fraternity by hosting this blog. coming to the points raised by suhas kothavle, i agree with ur view that 5 min time frame will limit ur loss of capital. but since the losses r too frequent i believe yhe lower time frame may not b that rewarding as the higher time frames. i hv been following the hourly nifty for last few months and believe that it is giving good results( one may try a combination of 15-60 min also). however can u pls check that if it is possible to hv 7-8 consecutive losses in higher time frames. i feel it may happen only in a very sideways mkts where nothing works and where lower time frames would definitely wipe u out.—-regards

        umakant

  2. hello,
    Thank you for your valuable information.
    i’m interested in auto trading, which is the best software for this.
    and any book recommendations, and courses.
    thank you

  3. Hi..
    Thanks for the valuable information regarding autotrading.
    Can you.please suggest any broker in india which supports autotrading for mcx with lower cost i mean as i want start with rs 1lac. And is there any legal issue in india for autotrading.i googled too much for this but find nothing about autotrading in india.

    1. Hey nice information shared on algo trading and their is some mandatory process before going for an algo trading in india @ vivek.

  4. Hey it is very useful information….algo trading tool not utilised properly may lead to big losses. It is good idea to back test or pilot every strategy before actually initiating.

  5. Is there any one who made success with auto trading in 5mins or 15mins trend using supertrend, On several back testing I found 15mins is better,
    Also at the every sl hit auto trade exits the position in real time but not in the signal charting, and if you automate reversal double positioning order at the sl point, that also increase the loss when the sl hits and go back to same trend,
    I hope any real time auto trader might experienced such many situation from morning 10am till evening 6pm, after hat trend continuous on one side for a while, but here we get confusion on where to book profit as we made consecutive losses in previous trades

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