trader. StockSharp

Stop-loss orders techniques use for Risk Management

2023-05-13T16:10:34Z

💥💥Stop-loss orders are a common risk management technique used in quantitative trading strategies. A stop-loss order is a type of order that is placed with a broker to sell or buy a security once it reaches a certain price. The goal of a stop-loss order is to limit the potential loss on a trade, by closing the position if the price moves against the expected direction.

💥In quantitative analysis, stop-loss orders are often used in combination with other trading strategies, such as trend-following or momentum trading. For example, a trend-following strategy might use a stop-loss order to close out a position if the price of a security falls below a certain level, indicating that the trend has reversed.

⚡️One common type of stop-loss order is the "trailing stop," which is a dynamic order that adjusts as the price of the security moves in the expected direction. A trailing stop is set at a certain percentage or dollar amount below the current market price of the security, and it moves up as the price of the security increases. If the price of the security falls below the trailing stop, the order is executed and the position is closed.

💥Another type of stop-loss order is the "fixed stop," which is a static order that does not change as the price of the security moves. A fixed stop is set at a certain price level, and if the price of the security falls below that level, the order is executed and the position is closed.

⚡️Stop-loss orders can be used to manage risk in a number of ways. For example, they can be used to limit the potential loss on a single trade, or they can be used to limit the overall risk exposure of a portfolio. Stop-loss orders can also be used in conjunction with other risk management techniques, such as diversification or hedging.

💥Stop-loss orders are widely used by traders to minimize their losses in case a trade goes against their expectations. Here are some examples of stop-loss order techniques used in quantitative analysis:

👉 1. Fixed percentage stop-loss: This is a commonly used stop-loss technique in which a trader sets a percentage below the entry price as the stop-loss level. For example, a trader might set a 5% stop-loss on a long position. If the price falls 5% below the entry price, the stop-loss order is triggered, and the position is automatically closed.

👉 2. Volatility-based stop-loss: In this technique, the stop-loss level is based on the volatility of the asset being traded. For example, if the volatility of an asset is high, the stop-loss level will be wider to account for the higher price fluctuations. On the other hand, if the volatility is low, the stop-loss level will be tighter.

👉 3. Moving average stop-loss: This technique uses the moving average of the asset price to determine the stop-loss level. For example, a trader might use a 50-day moving average as the stop-loss level. If the price falls below the 50-day moving average, the stop-loss order is triggered.

👉 4. Support and resistance stop-loss: This technique uses the support and resistance levels of an asset to determine the stop-loss level. For example, a trader might set the stop-loss level just below the support level of the asset. If the price falls below the support level, the stop-loss order is triggered.

👉 5. Trailing stop-loss: This technique is used to lock in profits as the price of the asset moves in favor of the trader. The stop-loss level is set at a certain percentage or dollar amount below the highest price reached since the trade was opened. For example, a trader might set a trailing stop-loss of 10% on a long position. If the price increases by 20%, the stop-loss level will be adjusted to 10% below the highest price reached since the trade was opened. If the price then falls by 10%, the stop-loss order is triggered.

💥These are just a few examples of the different stop-loss order techniques used in quantitative analysis. The choice of technique will depend on the trader's individual trading style and the characteristics of the asset being traded.

💥💥Overall, stop-loss orders are a valuable tool in the arsenal of quantitative traders, and can help to reduce the impact of unexpected market movements on trading strategies.

Mean Reversion Trading techniques in Algorithmic Trading

2023-05-08T16:21:11Z

💥💥Mean Reversion Trading is a popular strategy in quantitative analysis that involves identifying assets whose prices have deviated significantly from their average levels and then entering a trade with the expectation that the price will eventually return to the mean. The strategy is based on the assumption that markets tend to oscillate around a mean value, and that deviations from this value will eventually be corrected.

There are several techniques used in Mean Reversion Trading, some of which include:

👉 1. Moving Average: A common technique is to use moving averages as a mean-reverting indicator. When the price of an asset moves away from the moving average, it is considered to be overbought or oversold, and a trader can enter a trade with the expectation that the price will eventually return to the moving average.

👉 2. Bollinger Bands: Bollinger Bands are a technical indicator that measures the volatility of an asset's price relative to its moving average. When the price of an asset moves outside of the upper or lower Bollinger Band, it is considered to be overbought or oversold, and a trader can enter a trade with the expectation that the price will eventually return to the moving average.

👉 3. Mean Reversion Oscillator: The Mean Reversion Oscillator is a technical indicator that measures the distance between an asset's price and its mean value. When the oscillator is above a certain threshold, the asset is considered overbought, and when it is below a certain threshold, the asset is considered oversold. A trader can enter a trade with the expectation that the price will eventually return to the mean value.

👉 4. Pairs Trading: Pairs trading is a mean reversion strategy that involves identifying two assets that are highly correlated and trading the difference in their prices. When the price of one asset deviates from the other, a trader can enter a trade with the expectation that the prices will eventually converge.

👉 5. Relative Strength Index (RSI): The RSI is a momentum oscillator that measures the strength of a security by comparing its average gains to its average losses over a certain period of time. The RSI ranges from 0 to 100, and a security is considered oversold when the RSI falls below 30 and overbought when the RSI rises above 70. Traders use the RSI to identify potential buy and sell signals when a security becomes oversold or overbought.

👉 6. Moving Average Convergence Divergence (MACD): The MACD is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. Traders use the MACD to identify potential buy and sell signals when the MACD line crosses above or below the signal line.

👉 7. Mean Reversion Trading Strategies: Mean reversion trading strategies involve buying or selling a security when its price moves away from its mean, with the expectation that the price will eventually return to its mean. One example of a mean reversion trading strategy is pairs trading, where a trader identifies two securities that are highly correlated and buys the underperforming security while simultaneously selling the overperforming security. The trader then waits for the prices to converge before closing the positions.

👉 8. Statistical Arbitrage: Statistical arbitrage is a mean reversion strategy that involves identifying securities that are mispriced based on their historical relationships. Traders use statistical models to identify these mispricings and then buy the underpriced security while simultaneously selling the overpriced security. The trader then waits for the prices to converge before closing the positions.

💥These are just a few examples of the techniques used in mean reversion trading. The success of the strategy depends on the trader's ability to identify assets that are likely to revert to their mean values and to enter and exit trades at the appropriate times.

Let’s understanding the words Overbought, Oversold, Convergence and Divergence for basic indicator readings.

2022-12-24T18:42:34Z

💥Technical analysis has introduced various statistical and mathematical techniques to apply in analyzing stocks, which have become indicators of stock prices in many forms. In this text, we will discuss some of them, but those interested in other indices can read more as most of them use similar concepts.

💥In the use of technical tools to analyze stocks, oscillators are the commonly used instruments that measure oscillation. Among them are RSI and Stochastic, which can serve as indicators of the market direction in the short to medium term, especially during times when the market moves without direction, also known as sideways or fluctuations within a narrow band. During these times, oscillators can closely follow prices, enabling traders to use them as tools for buying or selling in the short term. Even in market conditions that are not clearly uptrending or downtrending, oscillators can help determine if the trend will continue to strengthen or weaken.

👉Introduction to Overbought, Oversold, Convergence, and Divergence👈

💥Most indicators are derivatives that measure changes in stock prices. A simple analogy is to compare the price to the speed of a car and the indicators to the car's acceleration when we press the accelerator or decelerate when we press the brakes. Acceleration increases the speed of the car, and we see the acceleration and top speed rise simultaneously.

💥When we release the accelerator, the car continues moving due to inertia, but the acceleration is zero. When we gently tap the brake, the car still moves forward, but the braking force gradually slows it down, and the acceleration becomes negative. In this case, the acceleration and velocity of the car move in opposite directions because the car continues to move forward, but with negative acceleration (becoming a deceleration).

💥Similarly, in the stock market, we may see that the price is still rising, but the market lacks momentum (which is like acceleration), and this is called overbought. This happens when traders have bought stocks to the point where almost everyone is holding stocks, but fewer people want to buy them. During a market crash, everyone rushes to sell, causing the price to drop rapidly due to strong selling pressure. But at a certain point, the selling pressure starts to decrease, and the market becomes oversold, even though the price is still declining.

💥Indicators are also used to measure buying or selling pressure, which determines the direction of the price. Therefore, during a market acceleration, indicators will move in the same direction as the price, which is called Convergence. But when the market starts to run out of acceleration, although the price is still running in the same direction, some indicators will start to move in a different direction from the price, which is what we call Divergence. This serves as a warning signal that the market is starting to run out of steam, and traders need to be careful as the direction may soon reverse (Reversal) since there is no other support to keep the market going.

💥Some traders are very quick and apply other technical principles to the indicator, such as using trendline charting techniques or finding the Moving Average of the indicator as a trading signal, which can give good signals. However, the best approach is to gradually start buying or selling little by little when there is a signal, using other technical tools with the indicator, and gradually buying or selling until the actual signal is confirmed. Some traders overreact to small indicator movements and buy or sell, which is not recommended.

💥General rules for reading indicators include that if the indicator reaches the upper or lower band, known as Overbought and Oversold, it indicates that the stock is overbought or oversold. If the indicator and the price move in different directions, this is usually a warning that a reversal may follow, and an important signal will be generated when the oscillator is in the OB/OS zone. For some indicators, crossing the zero line is a signal to buy or sell according to the trend.

💥Overbought and Oversold refer to indicators used to determine periods when market prices are too high or too low. When the indicator reaches the overbought level, it means that the asset is overbought and the price may start to fall. When the indicator reaches the oversold level, it means that the asset is oversold and the price may start to rise. Traders use these signals to make buying or selling decisions.

💥Overbought and oversold refer to the levels at which an asset's price has moved too far in a particular direction, either upward or downward. Overbought conditions occur when an asset's price has increased too quickly and too far, and may be due for a pullback or correction. Oversold conditions occur when an asset's price has decreased too quickly and too far, and may be due for a rebound or rally.

💥💥Traders can use various technical indicators, such as the Relative Strength Index (RSI) or Stochastic Oscillator, to identify overbought and oversold conditions. In general, when an asset is considered overbought, traders may consider selling or taking profits. When an asset is considered oversold, traders may consider buying or taking a long position.

💥Convergence and Divergence refer to indicators used to determine trend changes. When the convergence indicator starts moving towards the X-axis, it means that the trend is starting to change and a buy can be expected. When the divergence indicator starts moving towards the X-axis, it means that the trend is continuing and a sell can be expected.

💥Convergence and divergence are terms used to describe the relationship between an asset's price and a technical indicator. Convergence occurs when the asset's price and the indicator are moving in the same direction, indicating a strong trend. Divergence occurs when the asset's price and the indicator are moving in opposite directions, indicating a potential reversal in trend.

💥💥Traders can use convergence and divergence to identify potential buy and sell signals. In an uptrend, traders may look for bullish convergence, where the indicator is rising while the price is also rising, indicating a strong trend. In a downtrend, traders may look for bearish convergence, where the indicator is falling while the price is also falling, indicating a strong trend. Conversely, traders may look for bullish divergence in a downtrend or bearish divergence in an uptrend, as these may signal a potential reversal in trend.

💥Traders should use these indicators in combination with other tools and analyze data from multiple sources to obtain the most accurate buy and sell signals.

Different candles - one program!

2022-09-09T08:05:16Z

Candlesticks in stock trading are a constant and necessary attribute.
Today there are no traders who do not turn to candlestick charts and do not track market changes based on it.
The history of the "candle" display of market behavior is rooted in the past, in Japan of the 18th century, when a sequence of "candles" began to visually depict the price maximum and minimum for a certain period, as well as prices at the beginning and end of this period.
It makes no sense to describe the composition of the candle, since any trader knows these basics.
Speaking in the context of analysis, candlesticks are the basis of all fundamentals, an experienced trader can only look at the chart to determine the changing situation.
Sometimes a trader does not just determine the situation on the market, but is also able to predict changes , since the market tends, under similar conditions, to react equally to "stimuli".
As I wrote earlier, the abundance of trading tools only provide an opportunity to make deals, turning trading into an exclusively intuitive and speculative action.
Serious, not mass trading, requires a systematic approach, that is, you can't just take a terminal and start trading, initially you need to have knowledge .
This knowledge is based not only on the practical part - trading, but also includes a deep analysis of the market, its behavior on certain events.
Such reflections are clearly demonstrated by candles.
For most users, candles are the maximum and minimum for the period, but the variety of candles can surprise.
Each type of candle has its own meaning for the trader, and is able to provide him with a full amount of information on the desired asset or group of assets.
So, various candlesticks may be needed for analysis, but it is quite problematic to get market data for them.
Most programs and resources for downloading market data do not provide such information , and those that can provide do not allow you to get data on several types of candles at once .
The second problem is the need to convert data into the desired format for graphical representation of candlesticks and "visual" analysis.
Do not forget about the cost of such programs, which are rarely even "shareware".
As mentioned earlier, S#.Data solves these problems.
It allows not just to build candlesticks of various types, but also to save them, which is not a little important for further use.
Almost all sources do not directly broadcast market data on such candles, respectively, the problem for most programs becomes unsolvable, but S#.Data solves it by constructing such unique candles through other downloaded market data. For example from Ticks.

- For example, Volume Candlesticks, which display the volume of transactions for the selected period, and provide information about the activity of the instrument.

And it is just as easy to plot their schedule

- The program allows you to get Renko candles. The ranko chart clearly defines the main trend. Such a chart is useful in order to determine the key support and resistance levels, since it averages the main trend, small price fluctuations are not reflected, this allows you to focus on really significant movements.

Also, after receiving the market data, we build a graph.

- Equally important candles - Range candles. The peculiarity of this chart is that new candles are built depending not on the timeframe, but on the range that the price has passed . Accordingly, it is more convenient for the user to track price fluctuations.

And we also build a schedule.

- In addition to the candlesticks listed above, which are quite familiar to traders and their charts, Hydra allows you to get unique, but necessary data in the analysis.

So for example PnF candles (tic-tac-toe)

Or candlesticks Heiken Ashi Candles, used to track the market trend.

So S#.Data allows you not only to get ready-made market data, but also to build such data, the receipt of which is not possible. Moreover, it allows you to immediately build charts, combining all the stages for market analysis, reducing the financial and time costs of the trader.

That's it. See you in new articles.

Interactive Brokers API-what you need to know.

2019-11-07T12:22:52Z

For any trader who wants to play big, there comes a time when he needs to enter the international trading markets and, in particular, one of the largest markets – the US market. The abundance of brokers providing their services to the trader is not always beneficial, as various offers and conditions often put the trader at a standstill.
Let's look at the largest by the number of transactions per trading day company Interactive Brokers. Today, we can safely say that this company is the most technologically advanced company in the States in its field providing users with various types of connection to work through Interactive Brokers API.
It is very important that the broker works not only with US citizens, but also foreigners and tries to fully provide all technical support to foreign users.
A little history about Interactive Brokers. This broker has been working in the US market since the late 70s. For all the time of its work, the broker has established itself as a reliable, advanced in information technology partner. An important fact is that the broker is the only one in its field in the US market has its own clearing company. From 2010 to 2017, according to experts, Barron's Interactive Brokers was awarded the title of leader among online brokers. The broker is among the top ten, according to the resource www.stockbrokers.com, among online brokers. To date, the equity of the broker amounted to more than $6 billion, the market value ranges from $16 billion.

One of the important aspects to get started is opening an account with a broker. What are the positive aspects of broker account registration at Interactive Brokers:
- Registration takes place online, in which you fill out the necessary forms to open;
- Copies of documents for opening a brokerage account must be provided in electronic form.
After a few days, after the verification your account will be activated. Do not rush to transfer money before the end of the test, as you will not be able to use them until the documents are checked.

After it became available for the management of a brokerage account in the personal Cabinet you need to create a request for replenishment of funds.
Different currencies can be used to replenish the account, which simplifies the task for users.
Let's look at what types of platforms Interactive Brokers offers for trading:
- Mobile version of the platform, which enables online trading through mobile gadgets with iOS and Android operating systems;
- Desktop version of the platform Trader Workstation (TWS), which is a full-fledged terminal for work

- WEB application - WebTrader, built on HTML, allowing online use of trading functions and tools.
The Interactive Brokers API requires special attention. With all the positive reviews about Interactive Brokers, there is a very important point. The broker provides open source code to create its own application based on its API.
Many users who first open Trader Workstation, the desktop version of the terminal, are confused. The abundance of seemingly different related information on the screen leads to confusion. Quite a long time design, makes use of the terminal is very inconvenient and causing a large number of questions.
In order to correct the situation, the broker provided access to the Interactive Brokers API libraries, so that each user would have the opportunity to create their own terminal.

Applications that are created using Interactive Brokers API have full functionality, have access to the user's open accounts, access to market data and trading charts.
A wide range of programming languages is limited only by the choice of operating system for some of them:

Having the ability to create their own application, the user creates a convenient environment for work. For the convenience of creating your application, we recommend using our S#.API.
This program allows you to use libraries to create the necessary software product for the trader – terminal, using the C#. The library's own API, allows you to expand the capabilities of the created terminal. The integrated ability to connect through the necessary Protocol, such as FIX Protocol, through our connectors, allows you to simplify the user's work, thereby reducing the time for the development and adaptation of the application to work on the trading floor.

Pyramiding in trading

2020-03-10T22:39:46Z

Earlier in the articles, we considered such mechanisms used in trading as Stop-Loss and Take Profit. Of course, these two tools help reduce the risk and increase the profitability of the strategy. But what if, because of them, we limit ourselves to getting more profit?
To understand how this can be done, you need to consider Pyramiding.
What is pyramiding - оne of the types of strategy aimed at increasing capital by step-by-step opening of several transactions with a favorable trend. Using this strategy allows the trader to get a stable income.
Let's consider the principle of pyramiding.
The essence of pyramiding is that after the profitable result of the last transaction, the trader opens a new position, while doubling the bid, compared to the previous one. As for the risk arising from the next bid, it is equal to the sum of the profit of the previous stage and the initial bid. At the same time, the amount of profit depends on the so-called "steps" of pyramiding, and it grows exponentially.

Pyramiding is applicable in any market – stock, currency, and others. The trader adds a new position to the previous effective one, if the trend direction is profitable for him.
If the trader's actions are calculated correctly, he will always be in profit. The use of various trading robots also contributes to a more convenient use of pyramiding. For example, "Mr. Hyde" from StockSharp, which in automatic mode and flexible configuration can trade in pyramiding mode.
An important point is that the trader must be sure that the trend is stable, otherwise it can lead to losses. However, the use of automated programs, such as Designer, which use condition cubes and position protection, makes trading with pyramiding minimally risky. An example of this strategy is shown below.

Let's consider the basic rules of pyramiding.
- Constantly monitor the ratio of return and risk within 1 to 2, so that the previous yield can cover the current risk.
- All parameters used during trading must be calculated in advance before entering the market.
- Use pyramiding only on a stable trend.

Let's look at an example of using pyramiding.
Let the trader have a capital of $10,000. At each main level, it can buy 10,000 units of the selected currency. In the Forex market, this is 1 mini lot. The amount of profit at each stage will differ, however, the size of the set Stop-Loss for each opened transaction will be equal to 50 points.
So, the trader buys 10,000 units of the base currency. Let's assume that the market situation is shown in the figure.

The price rises and breaks through the resistance level, now this level becomes the support level.
Let a bullish pin bar be formed at the support level (a graphical analysis figure based on the non-indicator method of trading, as well as the analysis of Price Action charts), in consequence of which the trader decides to buy 10,000 units of currency. When a trade is opened, the trader sets the Stop-Loss at 50 points or 1% of the risk of capital.

This way the trend keeps its direction, and the trader trades further. The trend breaks the next level, and the price is set above the support level, and the trader buys another 10,000 units, and the previous Stop-Loss is transferred to the new level.
The same situation is when the price breaks the third level

Thus, the trader accumulates a long position of 30,000 units of the main currency by the third stage. There is almost no risk, since at the third stage, when a deal is concluded for 10,000 units, the profit will be 4% if the trend reverses.

The potential profit, with a successful outcome, can be 12%.
Let's look at this example in numbers.

It is important to see how the possible profit increases from each stage to the next, while reducing the risk
The trader's first trade will bring him a profit of 6% of the initial capital.
Consider all the situations in the market:
- First transaction: 10,000 units
Negative: there was a -1% loss
Positive result: +6% in profit

- Second transaction: 10,000 units
Negative result: no loss (+2%in profit from the first stage and -1% in loss from the second)
Positive result: +10% in profit (+6% in profit from the first stage and +4% in profit from the second)

- Third transaction: 10,000 units
Negative result: +4% in profit (+3%in profit from the first stage, +2% in profit from the second stage and -1% in loss from the third)
Positive result: +12% in profit (+6% in profit from the first stage, +4% in profit from the second stage and +2% in profit from the third)

As you can see, the risk is about 1%, while with positive trading of all three stages, the profit will be 12%

Main advantages and disadvantages of building:
Plus:
- Pyramiding strategy allows you to increase your income with minimal risk;
Minus:
- The strategy is quite complex and requires experience. It is possible to use the strategy for medium or long periods of time, preferably using automated trading systems. The correct calculation of the exit point from pyramiding, analysis and testing of the trend behavior is of great importance, which necessarily leads to the use of trading robots. Pyramiding is not suitable for scalping strategies, and is also aimed at long-term trading.

Pyramiding is a profitable and relatively safe method of trading. Its reliability has a downside in the duration of the process, the accumulation of sufficient experience and knowledge in trading that would correctly calculate the levels of trade. Also, this type of trading is not suitable for all traders, so choosing it as the main one should be conscious.

Interactive Brokers FAQ. INTERACTIVE BROKERS-who are they?

2019-12-11T15:35:11Z

Interactive Brokers is the largest broker in the United States, based on the volume of average daily transactions with profit. Interactive Brokers is a leading electronic Forex broker.

Electronic brokers are focused on trading strategies or trading robots that work in the sector of trading with commodities [nerd], this allows us to say that this broker is among the five Prime brokers.
Interactive Brokers is fully regulated by the financial industry Regulatory authority, the securities and exchange Commission, the new York stock exchange, the financial conduct Authority, and other self-regulatory organizations.
To get the data, use the API connection via the IB TWS terminal.

To work with this program, StockSharp has created its own API library, which allows you to create your own connection.
What can this give the trader? There are several advantages:
-The fastest quotes
-The average receiving speed is 4 MS
- Work with real and demo accounts
Accordingly, the use of Interactive Brokers with the help of API libraries opens up new opportunities for the trader, allowing him to expand the expansion of his trading operations.