A Professional Algorithmic Trading Community
What is M2M?
Mentors2Markets is a Global Algorithmic Traders Community.
First and foremost we are traders with a "passion" for trading for a living.
We enjoy Mentoring and collaborating with other traders to develop Algo's that improve the "Traders Edge".
Our Algo development is "Research Based" through years of experience, development and testing.
The Mentors2Markets community is not for everyone. We are focused on serious algorithmic traders with significant "risk" capital and a burning desire to succeed. We follow a methodological development approach to Algo development starting with an idea and followed by; proof of concept/ trade rules, data base development, data mining, initial strategy coding development, back testing; both "In" sample and "Out of" sample; Optimization, walk forward, and final allocation of capital decisions. Our target client(s) is the professional trader, CTA, Prop Firm or Hedge Fund.
What Is an Algorithmic Trading System?
Algorithmic trading systems, also referred to as mechanical trading systems, automated trading or system trading, allow traders to establish specific rules for both trade entries and exits that, once programmed, can be automatically executed via a computer. The trade entry and exit rules can be based on simple conditions such as a moving average crossover or can be complicated strategies that require a comprehensive understanding of the programming language or the expertise of a qualified programmer.
Advantages of Algorithmic Trading Systems
There is a long list of advantages to having a computer monitor the markets for trading opportunities and execute the trades, including:
- Minimize Emotions. Automated trading systems minimize emotions throughout the trading process. By keeping emotions in check, traders typically have an easier time sticking to the plan. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade.
- Preserve Discipline. Because the trade rules are established and trade execution is performed automatically, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of taking a loss, or the desire to eke out a little more profit from a trade. Automated trading helps ensure that discipline is maintained because the trading plan will be followed exactly.
- Achieve Consistency. One of the biggest challenges in trading is to plan the trade and trade the plan. Even if a trading plan has the potential to be profitable, traders who ignore the rules are altering any expectancy the system would have had. There is no such thing as a trading plan that wins 100% of the time – losses are a part of the game. But losses can be psychologically traumatizing, so a trader who has two or three losing trades in a row might decide to skip the next trade. If this next trade would have been a winner, the trader has already destroyed any expectancy the system had. Automated trading systems allow traders to achieve consistency by trading their plan.
- Improved Order Entry Speed. Since computers respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few seconds earlier can make a big difference in the trade's outcome. As soon as a position is entered, all other orders are automatically generated, including protective stop losses and profit targets. Markets can move quickly, and it is demoralizing to have a trade reach the profit target or blow past a stop loss level – before the orders can even be entered. An automated trading system helps prevent this from happening.
- Diversified Trading. Algorithmic trading systems permit the user to trade multiple markets, accounts or various strategies at one time. This has the potential to spread risk over various markets and strategies. What would be incredibly challenging for a human to accomplish is efficiently executed by a computer in a matter of milliseconds. The computer is able to scan for trading opportunities across a range of markets, generate orders and monitor trades.
Disadvantages and Realities of Algorithmic Trading Systems. Algorithmic trading systems boast many advantages, but there are some downfalls of and realities to which traders should be aware.
- Mechanical failures. The theory behind automated trading makes it seem simple: set up the software, program the rules and watch it trade. In reality, however, automated trading is a sophisticated method of trading, yet not infallible. Depending on the trading platform, a trade order could reside on a computer – and not a server. What that means is that if an Internet connection is lost, an order might not be sent to the market. There could also be a discrepancy between the "theoretical trades" generated by the strategy and the order entry platform component that turns them into real trades. Most traders should expect a learning curve when using automated trading systems, and it is generally a good idea to start with small trade sizes while the process is refined.
- Monitoring. Although it would be great to turn on the computer and leave for the day, automated algorithmic trading systems do require monitoring and a trader’s discretion to determine when it’s appropriate to enable the algorithmic trading system. This is due to the potential for mechanical failures, such as connectivity issues, power losses or computer crashes, and to system quirks. It is possible for an automated trading system to experience anomalies that could result in errant orders, missing orders, or duplicate orders. If the system is monitored, these events can be identified and resolved quickly. In addition, there are times when market conditions may not favor the particular strategy being traded which requires the trader’s discretion to determine, when and if, it’s prudent to enable the systems for trading.
Although appealing for a variety of factors, algorithmic trading systems should not be considered a substitute for carefully executed trading. Mechanical failures can happen, and as such, these systems do require monitoring.
To find out more and to let us know a little more about you, please complete our brief questionnaire below: