Automated Trading Software
Automated Trading Software | Backtesting Software - Following is a list of software that enables traders to backtest and/or automate trading strategies and systems.
Not all backtesting software can automate your trading by placing trades through a broker, but since they are related types of trading software, I've elected to give you a list of resources all on one page, from which you can do further research.
If you plan to get serious about backtesting massive amounts of intraday data, then you might want to consider getting a computer that has an Intel i7 processor and Windows 7, 64 bit operating system. It'll make tests run much faster than a cheaper dual core computer running on a 32 bit OS.
I know that's contrary to what I said about day trading computer requirements for a discretionary trader, but running automated trading software or backtesting software is a whole different animal and requires much more horsepower, so to speak.
You should also know that some backtesting software by virtue of its design will run backtests much faster on the same computer.
ARE YOU READY TO GO DOWN THIS ROAD?
I'll go ahead and tell you straight out, if you don't have any experience with programming computers or languages; going down the road of backtesting and/or algorithmic trading is a long road. It is going to require countless hours of your time to produce robust, day trading systems that produce profits that are consistent and reliable enough to trade with real money.
It is very tempting to go down this road with a dream of producing several systems, all making trades automatically with no emotions involved on different stocks or even different markets. And it's certainly possible. But, before you get started with any of this, I think it's wise to learn how to trade as a discretionary trader first.
You don't have to risk real money. You can use a simulator, but at least get involved with market dynamics first, before trying
to come up with a mechanical strategy to make money.
Get a feel for basic market supply & demand. Learn how to make the low risk to high reward trades that are produced by a sound day trading system.
Understand position size and trading money management. In other words, understand the basic components of trading before getting into algorithmic trading. I suppose that's mostly common sense, but I'm sure some computer science majors will want to just jump right in an go for it, thinking they'll produce an ATM machine right away.
HOW GOOD IS THE SOFTWARE'S SUPPORT?
If you've decided to look into automated trading software or backtesting software and especially if you lack experience in this area, I highly suggest you consider a platform with a strong user forum or at the very least great support from the software's developer. I can promise you this with 100% certainty. You will be using the software developer's forums a lot, and you will be asking many questions.
If their forums are thick with experienced, helpful users, this can make all the difference between being a frustrated user of expensive software or being a content user creating results. Because, you will have many questions that need answers.
BASIC COMPONENTS OF BACKTESTING AND AUTOMATED TRADING SOFTWARE
The following sceenshots are from Amibroker software. I have used this software and I will say that it is very good, inexpensive backtesting software, that you can try out for free.
Most backtesting platforms have the same basic components. They have an area to input your trading strategy using the software's computer code as below.
They have pages to adjust the backtester settings, stops, commissions, and many other details.
A page to choose symbols, filters, and a range of dates/time to run the backtest on. After running a backtest a page will show the results of the test, such as date/time of entry and exit, profit or loss, # of bars in trade, cumulative profit, -- all trade by trade.
Arrows are placed on a chart(s) where all trades were entered and exited according to your strategy's rules.
All backtesters have a page for optimizing your strategy's variables.
Some have 3D graphics that allow you to view how changes in those variables impact the system's profit.
Backtesting and automated trading software supply you with a mountain of data, such as net profit, average profit, largest win, %winners, exposure%, max. drawdown, profit factor, etc, that would keep even a workaholic, statistician happy.
But, if you're a beginner, and have never heard this before, please keep in mind.....no matter how good the numbers look on your backtests, they are numbers representing simulated trades from past data. There is absolutely no guarantee that your system will perform as well into the future.
Do I think it's possible to make money using 100% mechanical trading systems? Absolutely. I'm no expert at algorithmic trading. As I've mentioned, my experience is in discretionary trading. But, I've done a fair amount of simple backtesting and I think the basic way to look at mechanical trading is the same as discretionary. You should be diversified in your approach.
Relying on one single system or strategy just won't cut it. A multiple system approach to smooth out your equity curve is the best way.
But, this page isn't about testing details.....it's about giving you a resource of backtesting and automated trading software. So here's a list of companies with links that should keep you busy investigating and 'demo-ing' for quite a while.
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