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!