Metaquotes had conducted Automated Trading Championship during the year 2011 and published some of the vital statistics from the Real and Test Trades made by the participants during the Algo Trading championship. And Finally they came up with five parameters to compare the different mechanical trading system used by the algo trading participants for Better Profitability.
Out of the Five Parameters here are the two factors which one should consider seriously in his/her Mechanical Trading Strategies.
1)Choosing the Right Timeframe
2)Input Parameters in Mechanical Trading
Choosing the Right Timeframe
Here is the Timeframe Vs Profit results obtained from various algo traders during the Autotrading Championship 2011. From the Charts most of lower timeframe strategy players are more profitable when compared to the higher timeframe traders and lots of traders sticking to lower timeframe strategies had come up with better profitability than the higher timeframe traders. Generally Higher the Timeframe higher the risk involved in such strategies and if the mechanical strategy is not favorable against you in most of the cases the higher timeframe strategy tends to loose more when compared to lower timeframe strategy.
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Lower timeframe strategy involves huge number of money to be paid as brokerage/Spread but even then lower timeframe strategies performs better in terms of profitability when compared to higher timeframe strategies due to the underlying risk involved in each trades, provided one had followed a strong discipline in his/her mechanical strategies.
2)Input Parameters
As a mechanical traders you role in maximizing the profitability is by choosing the optimal parameters and by fine tuning it at regular intervals. But how to choose the input parameters and how many parameters to choose strongly affects your profitability.
And from the charts those who used immense amount of parameters did not make any profit or suffered heavy losses .More the inputs parameters more likely your trading algorithm is curve fitted for better profits but when comes to real trading your algo fails!
Leading Algo Traders generally had less than 10 input parameters. It should also be mentioned that 147 AlgoTraders did not have any input parameters at all and some of them were successful.
As a Mechanical Trader your goal isn’t to have the perfect indicator; your goal is to make money.”
To Get more statistics follow the post Optimization VS Reality: Evidence from ATC 2011
