In this post, we are going to discuss the main elements of developing a trading algorithm system. Building an end-to end trading system or writing profitable strategies requires four main steps:
- Identify a strategy — Decide which markets you want to trade, develop the logic with which you want to trade them and define parameters by which the trading logic is triggered
- Backtest your strategy — Analyze your strategy’s performance on historical data and remove biases
- Execute your strategy — Link to a brokerage and minimize the transaction costs (cost of trading and commission)
- Manage Risk — Create pre and post trade checks to avoid losses
Watch this short video where Chandini Jain (ex-Derivatives Trader at Optiver, Chicago) explains the process of building a trading system with a simple example.
This video should be a good starting point for people looking to learn about writing algorithmic trading strategies.
Download ppt here
Originally published at auquan.com on November 17, 2016.
