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Trading plan to operate automatically

In the previous article, we talked about a general trading plan and the differences between the trading plan and the trading strategy.

Here we are going to talk about the trading plan to operate automatically. The way of operating changes even if we are operating the same strategy manually and automatically. Therefore, the planning is also different. This article can also be useful if you do semi-automatic trading.

Tools #

Strategy creator #

An automatic trader is going to need, from the base, a solution that allows him to implement algorithms (going from the idea to an information system). We will also talk about this topic in this article.

Strategy validations (backtesting) #

Backtesting is essential since any automatic trader is going to launch their automatic system without having an idea of how they work. It is essential to have a software that allows you to validate your trading strategies. The most common backtesting platforms, as Metatrader, carry out the backtesting in your laptop, which will mean:

  • Having an information system that has sufficient resources to do backtesting.
  • Finding, managing and working on historical data to upload it in the computer.

In tradeasy we offer a backtesting tool that will not rely on your PC and you will not have to worry about historical data because all will be done in tradeasy serves with quality data at the tick.

Automatic trading platform #

In this point, you are going to use a platform that allows you automatic trading. You have to choose your favourite platform and later the broker that offers it. Other have a broker or a list of brokers and from there analyse the trading platforms alternatives.

Most known trading platforms:

  • MetaTrader 4 & 5 (tradEAsy generates systems for MetaTrader 4).
  • NinjaTrader
  • Visual Chart
  • PRO Real Time

Once we have the materials ready, we can start to plan our trading plan to operate automatically.

Trading plan parts #

Objectives #

We must have clear the objectives we want to achieve on automatic trading. “I want to make a profitable and consistent system”. “I want to have a valid strategy for multiple assets”, or “I want a trading strategy portfolio that diversifies the risk”, etc.

Time availability #

We have to know how much time we can devote to automatic trading. Automatic trading indeed reduces to 0 the time devoted to market operations, but we have to consider that planning, verifying, and monitoring strategies takes time.

Set up a working time in which you have free hours to elaborate and validate trading strategies. That can be in the closed market (holidays, for example) since we are working with historical data.

Trading type #

On one hand, you must decide if you are going to do automatic or semi-automatic trading.

In both scenarios, you must define, validate, and activate the strategies. Moreover, in semi-automatic systems, you must be available to execute opening and/or closing when you receive the automatic alarm.

Decide what trading is more suitable for you, and once you have it cleat, be consequent with the decision (it is not recommendable doing manual actions if you have decided to do automatic trading).

Operation type #

At this point, the fundamental thing is to know the type of operation we are going to carry out. In automatic trading is indifferent the free time you have to make a trading type (short/medium/long term) since the operation will be done by the automatic system. However, you must take into account your availability for semi-automatic trading, since at the moment you receive an alert you should be available to execute the orders.

Learning #

The automatic trading learning can be distinguished in two modalities.

  • Theoretical learning: this is all the information you can read in blogs, books, automatic trading course.
  • Practical learning: though backtesting, an automatic trader can learn so much in a short period of time evaluating the repercussions that different strategies have in the market.

Establish a learning plan that helps you learn new concepts as you take the most of backtesting to learn while you validate your strategies.

Work methodology #

We must think in the routines to follow in automatic trading. Considering all the steps, one should define the available time. For example, a person can plan to define a system in a weekend, during afternoons validating and redefining the system with backtesting, and the following week implementing it. Finally, take a dynamic between system monitoring of the ones already functioning and incorporate and distribute other systems.

This is the two fundamental aspects that you should have to plan your automatic trading. Do you have into account any other aspect? Tell us about it in Telegram.

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