strategyquant algorithmic trading – why and how?

StrategyQuantAlgorithmic Trading – Why and How?

Disclaimer

The following presentation is for educational purposes only. All symbols and trading ideas discussed are for demonstration purposes only and are not recommendations.

Active trading is not suitable for everyone.

Risk Warning - Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.

www.StrategyQuant.com

http://www.strategyquant.com/

Trading Strategy (EA, Forex robot)

• Consists of rules when to enter and exit the market

• Can be simple; or can consist of complex rules like partial entries and exits, advanced money management, etc.

• Can be traded mechanically or automatically - no room for opinion, everything is exactly defined



Computers & Trading

Two main types of trading approach:1.Discretionary – based on traders experience, opinion, actual feeling, etc. Trader follows a plan, but it doesn’t need to be 100% exact.

2. Automatic1. High Frequency Trading - usually deals with best execution2. Strategies/Systems Trading – developing and trading

strategies that have exact rules that can be programmed into a robot or traded mechanically, but without any room for subjective judgment

People rely on computers for wide range of tasks, including complicated ones like landing of airplanes or controlling a vehicle on Mars, so of course they are used for trading too..



Automatic vs. Discretionary Trading

Source: BarclayHedge

Mechanical: 488 Systems, 265 Billions Discretionary: 160 Systems, 24 Billions

Performance Index for the last 20+ years

Both automatic and discretionary approaches are widely used, both of them are used by individual traders, money managers and funds.

Much more money is allocated to mechanical system traders, even though their end to end performance is roughly the same.



Manual Design of Trading Strategy

• Starts with trader using his experience and knowledge to pick up the elements of the trading strategy like technical indicators, price patterns, entry and exit order types and general strategy design.

• When the prototype is finished, strategy is tested on the historical data to prove its profitability. The backtest often reveals that the strategy results are not acceptable.

• So the trader has to alter it, add or change some indicators, try different ideas, different values and then test it again.

• It is a long trial-and-error process with numerous iterations, revisions and testing until the strategy achieves acceptable results.



Now imagine you have a tool that does all this manual work for you, and does it 1000x faster...

Introducing StrategyQuant



What is StrategyQuant

SQ is a software that can automatically design new trading strategies using the power of genetic programming and evolution.

It can generate new trading strategies from the scratch, according to given entry configuration.

It is not an Optimizer, but a generator of trading systems based on predefined rules, parameters, indicators, price patterns, etc.


How it worksLet's say you want to create a new trading strategy for EURUSD. You'll choose the EURUSD data source, choose timeframe and time range.

Define which blocks the strategy should consist of (indicators, price data, operators, etc.).

Define what should be the parameters of resulting strategy - for example, total Net Profit must be above $ 5000, % Drawdown must be lower than 20%, Return/DD ratio must be above 4, it must produce at least 300 trades.

The just hit the Start button and StrategyQuant will do the work. It will randomly generate new trading strategies using building blocks you selected, tests them right away and stores the ones that fit your requirements for your review.


How it works - Genetic Evolution mode

• Randomly generates the initial generation

• Then simulates evolution – initial generation of strategies is then "evolved" over successive generations using genetic programming technology (crossover, mutation)

• As in evolution, this should result in better and better candidates, in our case in strategies that are more profitable, more stable, or generally better in the selected performance criteria


Advantages of StrategyQuant?

• No programming or Technical Analysis knowledge required - you don't need to specify any trading logic

• Most complex strategy design engine with four modes – build, test, improve, optimize

• Can generate strategies for virtually any symbol or timeframe

• You can get results quickly, there’s no steep learning curve


Key Features of SQFour working modes: Build, Retest, Improve, Optimizecreate strategy, retest on different symbol or timeframe, improve it by adding/replacing its parts, optimize it

Robustness Tests with Monte Carlo analysisreduces the risk of curve-fitting to historical data, increases strategy robustness

Powerful filtering capabilities enables you to configure the properties of your desired strategy, such as profit, drawdown..

Build-in Walk-Forward Optimizer and Walk-Forward Matrixanalyze reoptimization performance and effectiveness, choose best frequency

Support for over 40 technical indicators and price patterns Indicators, Price values, Candle Patterns, Operators, Time values, predefined rules

4 Entry types, 7 Exit methods, adaptive Stop LossEnter at Market, Stop, Limit, Reverse. Adaptive SL and PT, Trailing stops..


What To Expect?

• StrategyQuant is a tool, not a holy grail that creates a profitable strategy by pressing a button

• Forex is already a very efficient market, finding a profitable strategy requires time and testing, SQ can do most of the work

• StrategyQuant can save hundreds hours of development and come up with strategies that trader wouldn’t think of


Strategy Robustness and future performance

• Curve fitting is the main issue to watch for with computer generated strategies.

• StrategyQuant employs powerful tools to reduce the risk of curve fitting

– Out of Sample tests – tests on previously unknown data, or different symbols and timeframes

– Robustness tests – tests of strategy response to small changes of input, history data, missed trades, etc.


Strategy Robustness and future performance 2• Successful simple OOS test doesn’t guarantee that the strategy will be robust

also in the future – if the market fundamentally changes over what was used in our test the system can still fail.

What are the other techniques that can add confidence that the strategy is robust?

• Robustness tests - running Monte Carlo simulation of strategy tested with different stress conditions

• Developing the system on multiple different symbols or timeframes – a robust idea should ideally work on multiple markets and/or timeframe

• Walk Forward Analysis, Walk-Forward Matrix


• Technology you cannot build in-house• Saves strategy development time• Gives trader a competitive edge• Can be used to improve existing strategies

Why do traders buy StrategyQuant?

Aren’t you excited about increasing the possibility of earning more money by trading

your own strategies?


Machine designed trading systems are here!

• Build unlimited number of your own trading strategies• Develop strategies for virtually any market or timeframe• Generate new trading ideas!• Reduce the time required to build new strategy from

weeks to minutes!• Save your strategies as a MT4 EA with full source code!


Contact: Mark [email protected]

strategyquant algorithmic trading – why and how?

Documents