Monthly Archives: February 2017

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Simple Forex strategies

Category : Robots

Modern trading has evolved to such an extent that everyone who first learns it can choose an available trade algorithm and get to work. In fact, with the development of information technology, there are many techniques on the Internet that the traders are willing to share. Today we’ll look at several such methods.

I would like to highlight that the strategies listed below are ideal for trading on both the  broker’s server as well as via the FIXAPI protocol.

 1. Trading on the basis of a simple moving average.

Moving Average (MA) is a technical indicator that shows the average price value for n number of bars. For example, MA with a period of 50 will take into account the prices for 50 latest candles. The default setting in a FIXAPIMT4 trading terminal is a MA with the period of 14.

How to use MA? The basic principle of MA trading MA is to sell when the the currency pair quotes crossed the MA line from top to bottom, and buy when the price, on the contrary, crossed it from the bottom to up. Since the indicator is considered a trend one, finding currency pair quotations above the indicator values shows an uptrend, and vice versa. Everything is simple. Crossing MA is the signal by which the trading robot or the trader decides to open a short or long position.

2. Trading on the basis of several moving averages

Similarly, as in the first case, MA is utilised, but with a different period. 2 or 3 usually. Thus the signal for buying is not only when MA crosses the quotes, but the lines as well. For example, a FIXAPItrader establishes three MA with a period of 20, 50 and 100.

As in the case of price, line crossing enables to predict further market movement. MA with a longer period is a stronger signal. For example, when MA (20) crosses the line of MA (50) top-down, this is a signal for a sell deal opening. The situation is similar when MA (50) also crosses MA (100). Buy deals are made exactly the opposite way. There are also double signals, when, for example, MA (20) and MA (50) cross MA (100). This signal is stronger and more significant, and also shows the emergence of a new trend. Price crossing signals also remain valid.

It is worth to understand that the longer MA period is, the smoother the line will be. This is because the sample gets larger, that is, the number of quotations for the bar closing or opening (depending on the setting) grows, the average of which is differs only slightly. And if you take a period of 20, the average price will be expanded, which makes the indicator more “flexible”.

3. Trade on the MACD basis

MACD oscillator is so popular that it is used for trading by investment companies and major players in the market. The indicator can display signals based on divergence, crossing the balance line, as well as the signal line of the MACD histogram. And all this with a single indicator. More detailed instructions on the indicator may be looked up at the Investopedia website.

How do you use it? The MACD is presented in the form of a histogram with two lines. Where the lines intersect, it is a signal for opening positions. In analogy with MA, when the MACD line crosses the signal line top-down, it is a sell signal. If bottom-up, it is a buy signal. Histograms are confirming the signal and display possible divergence.

4. Trading on the basis of the oscillators

This implies trade using leading indicators. If MACD and MA are trend indicators, they are a bit “late” and confirm better an already formed trend. Oscillators though, can show the turning point. One of the popular indicators in this category is RSI. This indicator shows the “overbought” and “oversold” zones, after which a corrective turn should be expected. Thus, the buy signal will be the moment when the indicator is below the 30% range, and a signal to sell is finding indicator values above 70%. Everything is simple.

All examined Forex strategies are easy to understand and easy to use by FIX API brokers. Moreover, all of these simple strategies can be combined into one complex, because each of the above signals does not override the previous one, only confirms it.


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Latency Arbitrage: what is this?

Category : Robots

Automated trade with every year causes the increasing interest of traders. And there is no wonder why. The time of trading “via the phone” is already gone. In the digital industry, everything must be automated, including trading on the financial market.

A lot of resources and support tools were created to help traders and major market players with algorithmic trading. FIX API Protocol is one of them. It allows to bypass the brokerage platform (terminal and server) and to trade directly with the market liquidity. However, it is not an easy task for a trader, so one still should use a FIX API broker.

It is the direct access to prices and quotes that lets one use such a popular form of trade in the High frequency trading as arbitration.

Arbitration is a kind of trading system, which is based on trading on the minimum difference in the value of currency pairs or brokerage time latencies. On this basis, there are two ways of performing trading operations via this method:

  • FIX API Latency Arbitrage
  • FIX API 2-legs Arbitrage

 

Today we will focus on the first one, Latency Arbitrage. We will tell you about the key advantages, disadvantages, and key points of the strategy.

Advantages of Latency Arbitrage

Latency Arbitrage is also often referred to as 1-Leg FIXAPIarbitrage, which implies access to quotations and prices well ahead of other bidders. Direct connection to liquidity through the FIX API or to the servers close to marketplaces provides an early access to market prices. For example, in the United States a large portion of brokerage firms operate on the NBBO system. This allows HFT traders who use the Latency Arbitrage to obtain price information much earlier, and make several transactions in these fractions of a second.

Disadvantages of Latency Arbitrage

The popularity of this kind of FIX API trading had reached a peak, so that brokerage houses often block or impede normal trade. For example, they install additional spreads, slippage, or delay the execution of orders, which simply kills the trade regime, according to this algorithm.  As a robot performs around 100 or 200 transactions per day for a short period and fixes around 5-10 points, it is easy to detect.  This is the reason why brokers with non-market liquidity “don’t welcome” such trade.

Key points of Latency Arbitrage

In order to successfully trade according to this strategy, one only needs one account with a broker, which will directly be used for trading. You should understand that the account should be at a “slow” broker which gives you access to the FIX API Protocol. But due to the fact that usually there are, in truth, weak brokers, there may be additional manipulations on the company’s part. For this purpose it is necessary to test the broker on a small sum and make sure it provides regular open trading.

An example of arbitrage trade, on the principle of arbitration latency

The robot carries out the analysis of the “lagging” broker and compares its quotations with the market’s. For example, the EURUSD currency pair has a market price 1.07122 and 1.07115 at a broker. This 7 pips gap comprises the yield for a robot which decides to open a short-term speculative position for the purchase of the asset. Via such algorithm a robot can compare multiple assets and transactions at a time. A large number of tools and trade deals guarantee success of approximately 90% of deals, with a high rate of return.

In conclusion, I’d like to point out that the robot that works with this algorithm should use the principle of FIX API trading. This is an important factor in the success of the trading robot. After all, any delay or “sand in the wheels” from the brokerage firm have a negative impact on the result.


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So, who is a Forex Robot?

Category : Robots , Uncategorized

Forex is a huge trading platform working 24/5 with trading going on non-stop. Once you are a trader you come to a point where you understand you just can’t be trading as fast and as much as you would like to simply because of physical time, fatigue and your life apart from forex.

Technology came in to rescue and here we go: meet a forex robot. Who is this? What does it do?

Well, Forex Robot is an algorithm of certain actions that are programmed to perform trading – to open and close deals according to the preset parameters. In simple words, a trader sets up its robot to do the trading automatically. You can have a look at it here: https://en.wikipedia.org/wiki/Automated_trading_system

Think about it as a type of an artificial intelligence that actually works for you.

There are many tech companies programming and creating forex robots with their own algorithms and there are certain types of forex robots. Do not forget that forex market is a volatile one so the most popular type of robots would be so-called scalping robots.

But usually new or inexperienced traders instead of analyzing the needs, the market, different types of robots and the algorithms behind them, just try to search “a best forex robot”. Or a “free forex robot”. I would prefer to have a deeper look at what and how the robots are built.

 So, what do you take into consideration when choosing a forex robot?

Type of deals – scalping, day trading or position trading

  1. Algorithm of the dealing – a set of indicators or trader system (platform)
  2. Parameters of maximum drawdown set in the algorithm
  3. Mathematical expectations of robot performance
  4. Volume of trading

Clear, that your choice of a robot would play crucial role in your performance as a trader and the return of the investment.

So, we come to a point where it is highly important for a trader to pick the right robot. You need to understand that picking the wrong one is not only spending money but also ineffective trading in the future. Funds loss. Simple as that.

How do you choose the right one?

There are a few things to consider:

Before you buy a robot have a look at its financial trading data. Pay attention to the statistics of the trading deals, drawdown, recovery factor and profit factor. Positive indicators would mean bigger chance for successful trading.

  1. The option to optimize a robot. Forex is an ever-changing market and currency pairs do change their trends, so your robot should adjust to the trends and optimize itself to the market conditions.
  2. Have a look at the current performance of a robot for other clients. Read reviews on profitability and only then decide which one is best for you.

Mind you, once you are set up and trading and are happy with your robot doing the job you will have time for a closer look at the market and analyze your next moves, trends, etc. Currently around 80% of all trading is done by forex robots.

I have known the cases when traders got so experienced with different forex robots and their performance that they felt confident enough to employ a forex tech company producing robots and have their custom-made robot tailored and coded specifically for their needs.

Every trader has its own methods of market analysis and trading parameters so effectively trading is an algorithm of certain actions and decisions that you would like your robot to perform. When you are a newcomer, do your homework, analyze, read the reviews, see the stats, get two or three different robots, try them in a real-life trading and once you know what you are doing you can have your own robot designed and coded for you. Major hedge funds and big traders do have serious robots in their arsenal that demonstrate 1000% profitability per annum.

There are most common types of robots:

  1. Scalping
  2. Volume
  3. Grid
  4. Indicator
  5. News

From the types of robots, we understand that they correspond to different strategies of trading, based on different parameters. So, your first step of learning about who a forex robot is and what it can do is to start reading the forex robot reviews.


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