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Automated Trading 3: How to build automated strategies?

25 Sep 2017,

In today’s article, I am going to show you four ways how to build automated trading strategies, some of them are suitable also for nonprogrammers and beginners. We will analyze the advantages and disadvantages and I will add my own perspective and experience.

 

 

 

What are the methods for building strategies?

In principle, we have 4 basic options for strategy building.

  1. Program it by ourselves
  2. Let someone to program it
  3. Use a builder
  4. Use Auto Builder

We will look at all of them one by one.

I’m a programmer and I’m programming the strategies by myself

This idea comes to everyone´s mind. However programming is a complex discipline, and not everyone can handle it. Personally, I tried to learn MQL, but I never found enough time, so I don’t use this path.

What are the advantages and disadvantages?

  • You do not need money, just time.
  • You can program anything you want.
  • You are limited only by your experience.
  • You need to know how to program.
  • Learning how to program takes years.
  • Backtesting in MT4 is not easy.
  • You need to know what the strategy exactly does. So you need experience.

Level of difficulty: Very high, unsuitable for beginners.

 

I’m not a programmer, and I’m going to ask someone to program the strategy for me.

I have used  this way  for quite a long time. You have an idea and you give it to a programmer to program it. Basically, it’s simple, however there are few question marks.

What are the advantages and disadvantages?

  • You can take advantage of programmer’s experience.
  • You are limited only by the programmer’s experience.
  • If the programmer is a trader, the collaboration usually works well.
  • It’s very hard to find a free programmer who is also a trader at the same time.
  • They are usually not cheap.
  • You need to know what the strategy exactly does. So you need experience.
  • Backtesting in MT4 is not easy.

Level of difficulty: High – you need to know the markets as well as a good programmer, this way is not suitable for beginners.

 

I will use strategy builder

Builder is a special program where you made your own strategy. So you define the inputs, outputs, etc. You can do everything by yourself and then export the strategy into the metatrader format. It’s one way to build automatic strategies without programming.

What are the advantages and disadvantages?

  • These tools are usually cheap (hundreds of dollars).
  • You do not have to pay the programmer.
  • It is not time-consuming.
  • There are not many quality and powerful tools in the market.
  • You need to know what the strategy exactly does. So you need experience.
  • Backtesting in MT4 is not easy.

Level of difficulty: Medium High – you must know the markets, unsuitable for complete beginners.

From my point of view, The biggest disadvantage is backtesting in MT4. Making quality backtest is pretty hard.

 

Automatic strategy builder

This is the method I use today. In principle, we use special software that automatically builds strategies. I would compare it to mining bitcoins, but instead of bitcoins, you’re making strategies. Based on various methods, software searches for strategies, evaluates their results, and then saves them.

WARNING! Many people think they just press the button and it is done. This is of course nonsense that cannot work. Searching for strategies is the first step, followed by so-called quality testing, where we measure whether the strategy has a chance to survive in real terms. And that is key to the whole process. Without it, it is not possible to build a good strategy.

What are the advantages and disadvantages?

  • The software automatically inspects the market. So you do not need to have an idea for the strategy, the software will find it.
  • You don’t see just the results, but also the principle of the strategy, how it works exactly. It helps you learn more about the markets.
  • The software has its own backtester, so it is not necessary to backtest it in MT4.
  • It works 24 hours a day, 7 days a week.
  • You need to know how to test quality.
  • Software requires initial investment.

Level of difficulty: Low to high, depending on approach. If you study the principles of quality testing, then this method is also suitable for beginners. You will gradually learn from seeing the results, from the strategy principles and you will slowly find out what works and what does not.

I personally use the StrategyQuant software. I have been working with it since 2013, when first start to use it, at that time as a customer.

What’s next?

After this work, you already have a basic overview about how to build your strategy. Personally, I am using the last method. Let’s take a detailed look at how it works and I will add a video where everything will be explained in details.

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