In Step 3, our quantitative developer writes the code that defines when the trading robot buys and sells. The code is added into our professional quality trading infrastructure. The infrastructure handles most of the logistics of testing and trading and makes it easy to develop and test strategies quickly.
There are several reasons to use automated trading software. Here are a few reasons why:
Hire Subject Matter Experts
Your trading robot is simply a software program that runs automatically. You are able to hire subject matter experts develop and train your robot exactly how to trade. An expert will be assigned to take responsibility for each of the steps that are required for successful trading. The experts know the pitfalls to avoid and the correct way to complete the steps. The benefit of using software is that it can be passed from one expert to another and the robot will remember all of the training.
Validate the Strategy
When Step 3 is complete, the quantitative developer will be able to casually validate that the strategy defined in Step 2 is worth using.
Beat the Odds
Studies show that the majority of manual traders and investors fail to profit on a consistent basis. Those that do often fail to do better than the S&P 500. Each one thinks that they they are going to be the trader or investor that will beat the odds. It is important to remember that the majority of the capital that is traded each day is traded by trading robots.
After the trading robot is developed, the same robot will be used to execute trades. Self-proclaimed trading gurus that sell the idea that trading should be done manually usually offer a list of rules required to be a successful trader. They say:
Examine their suggestions very carefully. Then, realize that the things they are suggesting are all inherently done by trading robots. Moreover, studies show that when humans manually trade strategies that have been formally optimized, they underperform; Humans tend to break their own rules based on their momentary emotions. Sometimes, trading gurus argue that the reason humans are needed is to keep up with the changing market. However, the truth is that it is easy to retrain a trading robot much more quickly.
Keep up with Market Changes
The stock market changes and fluctuates over time. Your trading robot can be retrained periodically simply by repeating the statistical analysis and risk analysis optimizations. We use four different types of data when optimizing the algorithm to make sure it is robust. The repeated and rigorous testing will help your robot keep up with the changing market conditions as needed.
There are plenty of companies that offer trading platforms that you can use to research and develop a trading strategy. The problem is that none of those companies value your time. Imagine spending 250 days a year trading about 6 hours per day. That is 1500 hours per year! And, that is not counting the time that you may spend on continuing education. That amounts to spending 62 days of your life every year looking at boring charts and trading!
Why have a human to do a detailed repetitive task? That is like manually calculating your bank account balance (rather than trusting software to handle the task). With a trading robot working automatically on a daily basis, you can spend your time enjoying life or earning money in additional ways. Time is your most valuable asset.
Write the code
Our quantitative developer will write the code of the trading strategy based on the rules defined in Step 1.
Validate the strategy
The developer will get the first look at the trading strategy and will verify that it works by running some simulation tests. If the strategy does not meet our standards, it will be rejected by the developer. The quantitative analyst will review the results and submit a different strategy.
Run Unit tests
The quantitative developer will write unit tests. Unit tests test each rule of the strategy to make sure it performs as expected. It is a way of doing initial quality control.
Automate the system
The developer and system administor will add features to make sure that your trading robot it is extremely easy to use.
At the completion of this step you will receive a report describing the development of the software. The report will be included in the due diligence documents. When this step is completed, the software will be ready for the statistical optimization. At this point, the working software will be available, however it will still need to go through more rigorous testing. The testing will not only optimize the trading robot so that it can better make a profit, but it also helps reveal any flaws that would cause the robot to malfunction.