Monthly Archives: September 2017

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Construction of trading systems: what should each trading strategy consist of

Category : Strategy

A systematic approach determines the future success in all undertakings. Whether it’s business conducting, learning process, organization of some activities, as well as fixapi trading. Therefore, each manager tries to create his own vision of the market with the help of certain rules and principles, both of financial asset analysis, as well as trading operations methods. After all, not a person is forming aprofitableness. It is formed directly by the trading system, which in turn was created by a person. And all the success will depend only on how competently and accurately the trader follow his own rules.

If you are just on the way of developing your vision of the market and the strategy itself, today I will help you to come a few steps closer to your goal, becausefurther we will analyze the key underlying principles of a trading strategy creation and from whichunits it should consist of.

So, first you need to highlight the principles of a trading strategy, which you will continue to proceed in the future. I focus attention on the fact, that each fix api trader may have his own principles and purposes, which he pursues. So, I will select the following basic principles:

Trading strategy should be simple and accessible for you;

– Algorithm of actions should be logical, and also eliminating manual intervention in the process;

– Trading should be based on a possible risk;

– The goal is capital preservation, and only then its multiplication;

– Profitability of a trading strategy should cover the main passive sources of income.

Exactly on these key rules the most trading strategies for the fix apiforex market are created. You can expand this list.

Now, let’s move on to the question of what every trading strategy should consist. Here I will also highlight several key blocks, which necessarily must be present and can be the basis in creating the future of algorithmic approach (http://forexzzz.com/product/ctrader-connector-via-fix-api/).

Unit #1 Definition of algorithm

If you have already established the methodology, with which you’re trading, for example, using trading indicators, then you should arrange them in a logical chain and sequence. This is done in order to be able to understand, which trading signal follows which and what should be done in various combinations.

Unit #2 Opening of trading operations

If we continue our example and imagine, that you are using technical indicators in your trading, you should be aware, under what conditions trading operations will be opened. It can be the achievement of a particular zone by an indicator or the intersection of two different technical elements, that will create a trade signal for purchase or sale (http://1sforexsignals.com/). Anyway, the system should answer the question, what combinations should open a trade and which you should skip due to the lack of supporting filters.

Unit #3 Closing trading operations

If you have an entry into the transaction, then there must be an exit. For this youshould also write down, under what conditions opened operation should be closed. It may be the reverse combination of trading signals or achieving of certain levels. Don’t forget to set the Stoploss and Takeprofit levels, because it’s also certain conditions to exit trading positions.

Unit #4 Capital management

Trading strategy should also have a unit, that is dedicated to the determination of the transaction´s amount. And not only the volume, but so that, when closing the position no additional risks will appear. This is a very important point for achieving future goals, which is very hard for every fix api trader.

If you will be able to realize your strategy, then you will have complete mechanism for stable earnings. Moreover, thanks to such sequence and a simple chain of actions, you can implement a trading robotin the future, that will simplify the trading process in the financial market.


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Mathematical models in trading

Category : Software , Strategy

Each and every trader has to make a lot of choices every single day, from taking decision on selling or buying of an asset to selecting the proper way of trading activity. And if we talk about the last option, then it can be considered as the most difficult moment (according to my opinion), because it defines all future steps and action of a FIX APItrader.

As we all now, there are many different trading methods, which can be divided into the following groups:

– Scalping trading

FIX APIarbitraryalgorithms (http://forexzzz.com/product/forex-zzz-lock-arbitrage/)

– Speculativetrading (when trades are open for not more than 1 day)

– Swing trading (when trades are kept open for 2-3 days)

– Midterm investment (when money is invested into assets for a month or a quarter)

– Positionedinvestment (when investments are made for more than a year)

Each of these methods has its own market working mechanism, as well a set of tools to define the perfect moment for investment.

Today I want to offer you one of the methods of analysis that is used by all professional FIX API traders and big companies in order to define the list of assets for investment. We are going to talk about the usage of mathematical models, which are based on the statistic information and allow understanding the future growth or falling potential of a financial asset.

Mathematical models in trading include comprehensive information and a set of specific rules, which allow making recommendations for the asset managers on the future price of the asset. In other words these models can be used to make fast and reliable forecast about the future price of the asset. No doubt, the majority of models and the method itself are widely used in the stock market. However, there are many methods, which can be adjusted to work in the conditions of FIX API Forex market.

Even if we look at the popular trading robots, they can also be considered as mathematical models due to their nature (http://forexrobotsreview.eu/2017/06/20/high-frequency-trading-2/). However, today we are talking about different model creation principles, which are based on the fundamental data, allowing the asset manager to take the right and efficient decision.

In 99% of cases such mathematical models are used as a filter, and not as a base for a decision making. It turns out that if a trader has a trading strategy that shows various buying options, the trader is able to use special models in order to analyze the fundamental data, and create recommendations and the forecast about future changes of the price. After that, if the signal corresponds with the forecast, the trader can open various trades having minimum risks.

What kind of fundamental data from FIX API Forex market can be analyzed by the trading algorithm?

In order to make your model really efficient, you have to analyzethefundamental dataon a regular basis, adding them into your database for calculations. There are specific models, which are able to forecast the future economic growth basing on the historical data. They can also predict such things as inflation or the budget. By using this method one can forecast the following indicators:

  • GDP
  • Inflation
  • Labor market
  • Budget balance
  • Volume of production
  • Level of development in specific economy sectors
  • Volume of sales

Thin information shows the highest level of volatility during the moment of news appearance. In case if you have a tool that is able to make forecasts about such information with high precisions, you will be able to improve the profitability by making speculative trades during the moment of new data publication.

No doubt, mathematical models are simply useless for scalping or arbitrary systems. But in case if you are looking for a tool to get maximal profits and invest money on the long term basis, you definitely need to use mathematical models.


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The characteristics of different types of the arbitrage trade

Category : Software , Strategy

Exchange speculators are looking for a stable and profitable trade every day. The methods are changing, the strategies – optimizing and new methods of money management are developing continuously. The fix api traders are analyzing and sorting out a lot of information, searching for the Holy Grail. Today I am going to help you to identify a stable tool for profitable trading and review it in detail. I will consider the arbitration form of trade that you had might heard of before and that I have mentioned in my recent publications.

The arbitrage trading attracts more and more traders’ attention. Let’s investigate why it is so. The first type of trading allows trading with a zero risk parameter. It is an ideal choice of strategy for those, who want to save their capital and multiply it. After all, most investors are interested in the risk of trading, and only then profitability. Arbitration, in turn, allows you to achieve this goal.

The arbitrage trading attracts more and more traders’ attention. Why is it so? The reason is that this trading type allows trading with a zero risk parameter. It is a perfect strategy option for those, who want to save their funds first and then multiply it. Most of the investors are interested in the trading risk and then the profit. Arbitrage allows you to achieve this goal.

The main idea of the fix api arbitrage lies in the committing exchange operations based on exchange rate differences for the same financial activities at the different trading platforms. It means that when the price is different at the same exchange or at the same broker the trader can make transactions based on these deviations and fixate the positions when the same values are reached.

Thus, there would be a small loss with one operation but a profit with the other. The profit would exceed the loss by 2-3 points. Due to this, the breakeven of trading algorithms which trade according to the arbitration principles is formed, http://forexzzz.com/fixa/

The information technologies development has provoked the emergence of various types of arbitrage trading, which are implemented by the automated programs – trading robots.

According to this, the two key types of trading robots can be distinguished:

  • Fix api Latency Arbitrage
  • Fix api 2-leg Arbitrage

Fix api Latency Arbitrage

This arbitrage trading type is based on the committing speculative positions via comparing the price quotes between the faster and the slower fix api forex brokerage companies. The algorithm connects to the two trading accounts, which are often the prime one, and the ordinary one. The prime one is a fast quotation provider, while the slow one delivers quotes slower. Therefore, the robot opens trading operations on the “slow” broker’s account towards faster data, when the “slow” broker’s quotes deviate from the values of the faster one. For instance, if the price for EURUSD currency pair is 1.1720 at the “fast” and 1.1750 at the “slow” broker, you need to open a sale with a range of 20-30 points of profit.

Fix api 2-leg Arbitrage

On the other hand, this arbitrage type allows committing not only one, but two trading deals. The method is similar to the first type: two exchange sites are analyzed and the deals are opened in the case of exchange rate discrepancies. IN order to understand the essence of this particular arbitrage methodology, let’s take a look at the example, mentioned above. So, the EURUSD currency pair costs 1.1720 at the first broker and 1.1750 at the second one. We don’t mind which is the “fast” and which – the “slow one. The algorithm opens the purchase for 1.1720 and a sale for 1.1750. So, there is an informal lock. However, the deals are opened only when the maximum range of discrepancies is reached (let it be 30 points) and locked when, for instance, 15 points are reached. It means that the robot would close the deal when the difference between quotations would be 15 points. If the price at the first one would be 1.1745 later and 1.1760 at the second one, then the deals would be closed. The result of the first one would be +25 points, while for the second one it would be -10 points. It equals 15 points in the net profit.

Each of these arbitrage trading types is a universal tool for the risk-free trading. As you can see, the whole result from a trading is created by the number of such operations. They are quite easy to implement with the help of trading robots.

 

 


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Pending orders in trading

Category : Software , Strategy

Recently, I found an interesting article that was telling about the proper way to define the best moment to enter the market. The main idea is to open a position in case when all trading signals are available, and I agree with it in general. However, I think that one has to open positions only at the time of the signal formation and not just because such signal is already available.

In case when you open your terminal and choose an asset, and you see the operational confirmation of the trend or the correction caused by trading signals, it doesn’t mean that you have to open a trade (http://investment_terms.enacademic.com/14080/Trade_Signal). That means the signal has already been formed and used. That’s why you won’t get any profits by trading with it.

That’s a very popular mistake among the beginners in theFIX APIForex market. You need to know the moment when you have to open a position more than clearly. It includes both breakdown and recall of the market. You can solve this situation only by using the pending orders.

Pending orders is the method of trading transaction execution based on the future values of financial assets. In case you are going to buy and sell assets using the current market price, your transactions will be executed using the current values. In case if you are waiting for the breakdown, you can use pending orders, setting specific prices, which can be higher or lower than the breakdown level. Such method makes it possible to enter the market without continuous and uninterrupted participation of the FIX API trader.

Main types of pending orders:

Buy stop –allows opening a trade using the future price growth. For example, when rates are showing significant growth, and the trader is waiting for an additional jump after the formation of the technical level or the breakdown, they are able to create buy stop above the upper level of the rates, thus the trade will be executed when the price of the asset starts to grow, reaching the indicated level. Inotherwords, theFIX API traderexpects the subsequent growth.

Sell stop –allows opening trade using the future price reduction. For example, when current rates are decreasing, and the traders note signs confirming further reduction, they are able to create pending orders with the lower price that is usually located beyond the local minimum. Thus, when the rate will reach the selected level during the process of price reduction, a selling trade will be automatically executed for the trader.

The first two types of pending orders are the perfect solution for those asset managers trading using the level breakdown. In such situation both buy stop and sell stop are the main elements for such breakdown trading.

Buy limit – is a pending order that allows buying an asset after the reduction or correction of the price. For example, when rates have reached the level of resistance and bounced from it, but the trader is waiting for the further growth after a small correction. Insuchsituationthetraderisabletocreatethebuy limit order at the lower price (usually at the Fibo level), while the price has to continue its growth after reaching the mentioned level.

Sell limit –is a pending order that allows selling an asset after the growth or correction. We can use a similar example for this case. Let’s say that rates are growing and approaching the resistance level. The trader can use the current level to create an order to open a short position when it’s reached. In other words FIX API trader is waiting for the bouncing from the current level, followed with the reduction of the price.

Such pending orders have to be used at the moment of the trading signal formation. The moment when rates will cross the indicator or break through the level, will be the wake-up call. The trader will be aware of that breakdown and will know how to act. After creating a pending order and setting the limiting levels for losses and profits, one can continue with the analysis of different assets.

The pending order is an efficient tool even for the algorithmic trading (http://forexzzz.com/product/forex-zzz-lock-arbitrage/). EvenFIX APIsupports pending (delayed) transactions, which are used by trading robots in order to execute trading order even more precisely.

 

 


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How to implement arbitrage trading in the forex market?

Category : Robots , Software

A few years ago, arbitrage trading was discussed only in the stock and commodity markets, because it originated from there. However, the development of information technology has made it possible to create ways to apply these algorithms in the foreign exchange market. This automatic approach turned arbitrage into a reality for fix apiforexmarket speculators.

Arbitrage fix api trading consists in analyzing two identical tools or derivative assets on different stock exchanges and at a time when the cost is significantly different, you can make two transactions and earn on it. It is not a secret that, for example, the value of gold can have one value in Shanghai, and another in London. If this cost is significantly different, arbitrage traders immediately enter the position, as the asset is the same. Therefore, it is worth expecting a price smoothing. The forex market operates based on a similar operation principle.

The difficulty was that the currency market is a single exchange platform. But this issue is solved by fix apiforex brokerage companies. Probably, everyone has faced a spread, which brokers establish and noticed that the cost of one currency pair differs in different companies. This is what allows us to apply the arbitration approach in the foreign exchange market.

Conclusion #1: The implementation of arbitrage means to analyze the same asset, but at different brokerage companies.

However, the second difficulty appeared here. The forex market is the most liquid and volatile market, and the usual fix api trader simply cannot analyze the whole map of the market and other two platforms. What for the trader is impossible, for the robot is easy. Thanks to the algorithmic approach, this issue is also solved.

Conclusion # 2: Thus, the implementation of arbitrage is to analyze the same asset, but at different brokerage companies using automated trading systems.

What you need to implement this idea:

  1. A trading account in two brokerage companies;
  2. Brokerage companies themselves should be reliable, but at the same time should have different liquidity providers or one of the companies should be the liquidity provider itself – the prime broker;
  3. Configure the exchange rate difference of the normative range for the currency pairs;
  4. Find the maximum discrepancy between the quotes from which trading transactions will be opened, using statistical data;
  5. Find the parameter at which the trades will be closed (the minimum exchange rate difference).

These are the simplest methods for creating an automated algorithm for conducting fix api arbitrage trading in the forex market.

How does this work with an example:

Let the trader opens a trading account in different companies and he has an arbitration algorithm that trades on the EURUSD currency pair. If there is a discrepancy between the brokers for more than 10 points, the robot makes transactions in the spread direction. So, if the value of the currency pair at one is 1.1410, and at the second one is 1.1420, the robot will open a deal to buy from the first and to sell from the second one, and when the exchange difference reaches 3 points, the deals will be closed. If the quotes are 1.1455 and 1.1458, then the result is the net profit points, taking into account the fact that arbitrage transactions have a short period of holding positions.

This approach is already used by some developers of trading software. There is software on the market (http://forexzzz.com/arb/), which works on the same principle that I wrote above. But the data for comparison and analysis is obtained with fix api, which allows you to connect to the servers of the liquidity provider and trade directly in the market while at the same time making arbitration transactions between the brokerage companies.


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