What are algorithmic forex and futures trading systems

Algorithmic or quantitative trading is a technical investment method that relies on the use of mathematical formulas and computations to recognize trading opportunities as opposed to qualitative or discretionary trading techniques which rely on the traders individual personal insights and analyses.

A simple algorithmic system may for instance have fixed rules that say “buy every Monday morning at 10 am if today’s open is higher than Friday’s close” and ” exit long every Tuesday afternoon at 3pm”

There is no room for misunderstanding or variations with such systems. Everybody that trades it will get exactly the same signals and results (excluding slippage).

Furthermore once you have a rule based system such as this it can be transferred to the trading platform and set to trade for you automatically. Set and forget if you like.

Over 90% of short term institutional money is traded using algorithmic or quantitative trading techniques. The vast majority of consistently successful home based traders are systematic traders.

These strategies are infinitely repeatable with almost no variance whilst discretionary strategies rely on the discretionary judgments and interpretations of each individual trader so by definition they will produce often widely varying results from the same data set when analysed by different traders (and worse still even when analysed by the same trader on different occasions).

The mathematical formulas comprising the trading strategies are held on the trading platform which constantly monitors the incoming real time data. Generally orders (entries, stops, exits etc) are then placed automatically by the program which then manages those open trades on an ongoing basis according to the rules contained within the algorithms. The systems run and trade fully automatically and aside from monitoring fills, data feed integrity etc they can be left to trade for themselves.