trading robot. StockSharp

Order Monitoring in trading robot

2023-05-27T07:38:29Z

💥💥Order monitoring is a vital component of trading with a trading robot. It involves tracking the status and performance of placed orders to ensure they are executed correctly and in line with the trading strategy. Here are some key aspects of order monitoring in a trading robot:

👉 1. Order Execution: The trading robot should continuously monitor the execution of orders. It should confirm that orders are submitted to the market as intended, without any errors or delays. Monitoring the execution ensures that trades are entered at the desired price levels and in a timely manner.

👉 2. Order Fills: After an order is executed, the trading robot should monitor the fill price. It verifies that the order is filled at or near the expected price. Monitoring order fills helps identify any slippage or discrepancies between the intended price and the actual fill price, which may impact the overall trading strategy and profitability.

👉 3. Order Management: The trading robot should keep track of open orders and manage them accordingly. It monitors open positions, including stop-loss and take-profit orders, and adjusts them as necessary. If a stop-loss or take-profit level is reached, the robot should promptly execute the corresponding action to close the position and manage risk.

👉 4. Order Validation: Order monitoring includes validating the integrity and accuracy of placed orders. The trading robot should verify that all required order parameters are correctly specified, such as trade size, order type, stop-loss levels, take-profit targets, and any other relevant order details. This validation helps prevent potential errors or unintended consequences resulting from incorrect order parameters.

👉 5. Order Rejection and Error Handling: In some cases, orders may be rejected by the market or encounter errors during execution. The trading robot should be equipped to handle such situations. It should identify and handle order rejections or errors promptly and provide appropriate notifications or alerts to the trader. Effective error handling ensures that any issues with order execution are addressed in a timely manner.

👉 6. Order Tracking and Reporting: The trading robot should maintain a comprehensive record of all executed orders, including entry and exit points, timestamps, fill prices, and any associated order parameters. This order tracking enables traders to review and analyze the performance of their trades, evaluate the effectiveness of the trading strategy, and make informed decisions for future trading activities.

👉 7. Real-time Market Data: To effectively monitor orders, the trading robot requires real-time market data. It should continuously receive updated price feeds, market depth, and other relevant information to accurately track order status and market conditions. Reliable and timely market data is essential for making informed decisions and managing orders effectively.

⚡️⚡️Order monitoring in a trading robot ensures that trades are executed correctly, risk is managed appropriately, and the trading strategy is followed. By closely monitoring orders, traders can promptly respond to changes in market conditions, identify any issues or deviations, and maintain control over their trading activities. Regular review and analysis of order monitoring data help refine the trading strategy and optimize the performance of the trading robot.

Risk Management in trading robot

2023-05-27T07:33:04Z

💥💥Risk management is a crucial aspect of trading, and it is equally important when using a trading robot. Here are some key considerations for implementing risk management in a trading robot:

👉 1. Position Sizing: A trading robot should incorporate a position sizing algorithm that determines the appropriate trade size based on the available capital, risk tolerance, and account balance. Position sizing helps control the risk exposure of each trade and ensures that no single trade has the potential to significantly impact the trading account.

👉 2. Stop-Loss Orders: Including stop-loss orders in the trading robot's strategy is essential for managing risk. Stop-loss orders are placed at predetermined price levels and are designed to automatically exit a trade if the market moves against the expected direction. By defining an acceptable level of loss per trade, the trading robot helps limit potential losses and protect the trading capital.

👉 3. Take-Profit Targets: Setting take-profit targets helps secure profits by automatically closing a trade when a predetermined profit level is reached. By defining a target profit for each trade, the trading robot ensures that profitable trades are not left open indefinitely, reducing the risk of potential reversals and giving traders the opportunity to lock in gains.

👉 4. Trailing Stops: Implementing trailing stops in the trading robot allows for dynamic adjustment of stop-loss orders as the trade progresses in favor of the trader. A trailing stop trails the market price at a specified distance and is triggered if the price moves unfavorably by that distance. Trailing stops help protect profits by automatically adjusting the stop-loss level to capture potential gains while still allowing room for market fluctuations.

👉 5. Risk-Reward Ratio: The trading robot should consider the risk-reward ratio for each trade. A favorable risk-reward ratio ensures that the potential profit on winning trades outweighs the potential loss on losing trades. By incorporating this ratio into its strategy, the trading robot can identify trades that offer a suitable risk-reward profile and avoid trades with unfavorable risk-reward ratios.

👉 6. Diversification: It's important for a trading robot to incorporate diversification principles into its strategy. Diversifying across different markets, instruments, or trading strategies can help spread risk and reduce the impact of potential losses from a single trade or market. A well-diversified trading approach can enhance risk management and improve the overall stability of the trading robot's performance.

👉 7. Backtesting and Analysis: Before deploying a trading robot with real capital, thorough backtesting and analysis should be conducted. Backtesting involves running the robot's strategy on historical market data to evaluate its performance and risk characteristics. By analyzing the results, traders can assess the robot's risk management parameters and make necessary adjustments to optimize its performance and risk control.

⚡️⚡️It's crucial to note that risk management should be tailored to each trader's individual risk appetite and trading goals. Implementing robust risk management principles in a trading robot helps protect against adverse market conditions, minimize losses, and increase the likelihood of long-term profitability. Regular monitoring and evaluation of the robot's risk management performance are essential to ensure its effectiveness and adapt to changing market conditions.

Market Analysis in trading robot

2023-05-27T07:14:34Z

💥💥Market analysis is a crucial component of a trading robot's functionality. It involves collecting and analyzing relevant market data to identify trading opportunities and make informed trading decisions. Here are some key aspects of market analysis in a trading robot:

👉 1. Data Collection: The trading robot gathers market data from various sources, such as price feeds, news feeds, economic calendars, and other relevant data providers. This data can include historical price data, real-time price quotes, volume information, economic indicators, and news events.

👉 2. Technical Analysis: The trading robot applies technical analysis techniques to the collected market data. It uses mathematical indicators, chart patterns, trend analysis, and other tools to identify potential market trends, support and resistance levels, and entry/exit signals. Technical analysis helps the robot make objective trading decisions based on historical price patterns and statistical calculations.

👉 3. Fundamental Analysis: Some trading robots incorporate fundamental analysis into their market analysis process. They consider economic data, news releases, company financials, and other fundamental factors that can impact market prices. By evaluating fundamental factors, the robot can assess the underlying value of an asset and make trading decisions based on the perceived market conditions.

👉 4. Sentiment Analysis: Sentiment analysis involves assessing the overall market sentiment or investor sentiment towards specific assets or the market as a whole. Trading robots may use sentiment analysis techniques to analyze social media sentiment, news sentiment, or market sentiment indicators. This information helps gauge market participants' emotions and expectations, which can influence market movements.

👉 5. Pattern Recognition: Trading robots can be programmed to recognize and analyze specific patterns in the market data. These patterns may include chart patterns (such as triangles, head and shoulders, or double tops/bottoms), candlestick patterns, or other recurring patterns that have historically indicated potential trading opportunities. By identifying these patterns, the robot can generate trading signals or alerts.

👉 6. Risk Assessment: Market analysis in a trading robot includes assessing and managing risk. The robot analyzes market volatility, historical price ranges, and other risk factors to determine appropriate position sizes, stop-loss levels, and take-profit targets. It aims to optimize risk-adjusted returns and protect capital from excessive losses.

👉 7. Real-time Monitoring: The trading robot continuously monitors the market in real-time, updating and recalculating analysis as new data becomes available. It reacts to market conditions, triggers predefined trading signals, and executes trades based on its programmed rules and algorithms.

👉 8. Adaptive Strategies: Some advanced trading robots incorporate machine learning or adaptive algorithms to adapt to changing market conditions. They continuously learn from market data, evaluate the performance of their strategies, and make adjustments to improve future trading decisions.

⚡️⚡️Market analysis in a trading robot enables the automation of decision-making processes based on objective analysis and predefined rules. It allows the robot to identify trading opportunities, execute trades, and manage risk efficiently. The depth and sophistication of market analysis will depend on the design and capabilities of the specific trading robot.

Strategy Development in trading robot

2023-05-27T07:08:45Z

💥💥Developing a trading strategy within a trading robot involves several key steps. Here's a general framework for strategy development:

👉 1. Define Your Trading Goals: Clearly articulate your trading goals, including your desired returns, risk tolerance, time horizon, and any specific market conditions or instruments you want to focus on. This will guide the development of your strategy.

👉 2. Market Research and Analysis: Conduct thorough research on the markets you want to trade. Study historical price data, market trends, economic indicators, and other relevant factors. Identify patterns, correlations, and potential trading opportunities.

👉 3. Determine Entry and Exit Signals: Based on your analysis, determine the specific criteria or signals that will trigger trade entries and exits. This may include technical indicators, chart patterns, fundamental factors, or a combination of multiple indicators.

👉 4. Risk Management: Define your risk management rules, including position sizing, stop-loss levels, and take-profit targets. Establish guidelines for managing risk to protect your capital and minimize losses.

👉 5. Backtesting: Use historical market data to backtest your trading strategy. This involves running the strategy on past market conditions to assess its performance, profitability, and risk. Adjust parameters and rules as needed to improve the strategy's results.

👉 6. Optimization: Fine-tune your strategy by optimizing its parameters. Use optimization techniques to find the optimal values for indicators, thresholds, or other variables within the strategy. This helps to improve performance and adaptability to different market conditions.

👉 7. Implement Strategy in the Trading Robot: Once you have finalized your strategy, program it into your trading robot. Specify the entry and exit rules, risk management parameters, and any other relevant instructions. Ensure that the trading robot executes the strategy accurately.

👉 8. Paper Trading: Before deploying the trading robot in live trading, consider testing it in a simulated or paper trading environment. This allows you to evaluate its performance in real-time market conditions without risking actual capital. Make necessary adjustments based on the results.

👉 9. Live Trading and Monitoring: When you are confident in your strategy's performance, start live trading with the trading robot. Monitor its performance closely, track trade executions, and assess its effectiveness over time. Make periodic evaluations and adjustments as needed.

👉 10. Continuous Improvement: Trading strategies should be continuously reviewed and improved. Stay updated with market changes, evaluate the strategy's performance, and adapt it to evolving market conditions. Regularly assess and refine your strategy to enhance its profitability and consistency.

⚡️⚡️Remember, strategy development is an iterative process. It requires ongoing research, analysis, and adaptation to remain effective in dynamic markets. Be open to making changes and refining your strategy based on new information and market insights.

Trade Execution in trading robot

2023-05-27T07:25:42Z

💥💥Trade execution in a trading robot refers to the process of placing and managing trades based on the signals generated by the robot's trading strategy. Once the market analysis is completed and a trading opportunity is identified, the trading robot executes trades automatically without human intervention. Here are the key aspects of trade execution in a trading robot:

👉 1. Order Placement: When a trading signal is generated, the trading robot sends an order to the broker or trading platform to execute the trade. The robot specifies the details of the order, including the asset to be traded, trade direction (buy or sell), order type (market order, limit order, stop order, etc.), order quantity, and any additional parameters required by the broker or trading platform.

👉 2. Order Validation: Before sending the order, the trading robot may perform validation checks to ensure the order meets certain criteria or conditions. For example, it may check available account balance, margin requirements, position limits, or other risk management rules to determine if the trade can be executed. This helps prevent errors or unwanted trades.

👉 3. Trade Management: Once a trade is executed, the trading robot monitors and manages the trade according to its programmed rules. This includes setting stop-loss and take-profit levels, adjusting the trade's trailing stops, or implementing other risk management techniques. The robot continuously tracks the trade's performance and adjusts its parameters as necessary.

👉 4. Order Execution Speed: Trading robots aim to execute trades quickly and efficiently to take advantage of market opportunities. They rely on fast and reliable connectivity to the broker's servers or trading platform to minimize trade execution delays. The speed of order execution can be critical, especially in fast-moving markets or when trading short-term strategies.

👉 5. Trade Monitoring: The trading robot continuously monitors the open trades, tracking their progress, and making real-time adjustments if necessary. It may update stop-loss or take-profit levels based on market conditions or modify the trade's parameters as per its strategy. The robot ensures that trades are managed according to its predefined rules and risk management protocols.

👉 6. Order Filling and Confirmation: After the trade is executed, the trading robot receives order fill notifications or confirmations from the broker or trading platform. It verifies that the trade was executed correctly and records the trade details for future reference and analysis.

👉 7. Trade Reporting: Trading robots often provide trade reports or logs, summarizing the executed trades, their entry/exit points, trade duration, profitability, and other relevant statistics. These reports help traders assess the performance of their trading strategies and make informed decisions for future optimization.

⚡️⚡️Trade execution in a trading robot offers several advantages, including speed, accuracy, and the ability to execute trades according to predefined rules consistently. It eliminates the emotional biases and errors that can occur with manual trading, streamlines the trade management process, and allows for precise implementation of trading strategies. However, it's important to carefully design and test the trading robot's execution logic to ensure proper trade execution and risk management.

How is trading robot working?

2023-05-19T18:12:59Z

💥💥A trading robot, also known as an automated trading system or algorithmic trading system, is a software program that executes trades in the financial markets on behalf of traders. It operates based on predefined rules and algorithms, without the need for manual intervention. Here's how a trading robot typically works:

👉 1. Strategy Development: The trading robot is programmed with a specific trading strategy. The strategy defines the conditions for entering and exiting trades based on various indicators, signals, or algorithms. These rules can be based on technical analysis, fundamental analysis, or a combination of both.

👉 2. Market Analysis: The trading robot continuously monitors the market using real-time or historical data feeds. It analyzes the market conditions and price movements, applying the predefined strategy rules to identify potential trade opportunities.

👉 3. Trade Execution: When the trading robot identifies a trade setup that meets the specified criteria, it automatically generates and executes the trade orders. This includes placing buy or sell orders with the appropriate parameters, such as the asset, quantity, price, and order type (market order, limit order, etc.).

👉 4. Risk Management: Trading robots incorporate risk management rules to protect against excessive losses. These rules may include setting stop-loss orders to limit potential losses, implementing trailing stops to secure profits, or adjusting position sizes based on predefined risk levels.

👉 5. Order Monitoring: The trading robot continuously monitors the executed trades, tracking their performance and adjusting stop-loss levels or take-profit targets as necessary. It may also monitor market conditions to identify when to exit a trade based on the strategy rules.

👉 6. Speed and Efficiency: One of the key advantages of trading robots is their ability to execute trades with high speed and precision. They can analyze multiple markets and assets simultaneously, identify trade opportunities faster than human traders, and execute orders instantly, minimizing latency and slippage.

👉 7. Backtesting and Optimization: Before deploying a trading robot in live trading, it is crucial to backtest and optimize the strategy using historical market data. This helps assess the performance of the strategy over time and identify any potential issues or areas for improvement. Backtesting allows traders to validate the effectiveness of the robot before risking real capital.

👉 8. Continuous Monitoring and Maintenance: While trading robots can operate autonomously, it is important to monitor their performance regularly. Traders need to ensure that the strategy remains effective under changing market conditions and make necessary adjustments or updates as required. Regular monitoring helps maintain the robot's performance and adapt to new market dynamics.

💥💥It's worth noting that trading robots are only as good as the strategy and rules they are programmed with. Therefore, it is crucial to develop a robust and well-tested trading strategy and regularly evaluate and update the robot's performance to ensure its effectiveness in different market conditions.

What is The Trading Robot?

2023-05-19T18:00:38Z

💥💥Trading robots, also known as automated trading systems or algorithmic trading systems, are computer programs that execute trades based on pre-defined rules and algorithms. These robots are designed to automatically analyze market conditions, identify trading opportunities, and execute trades without the need for manual intervention.

⚡️Trading robots can be beneficial for traders as they can eliminate human emotions and biases from the trading process, execute trades with high speed and accuracy, and operate 24/7 without the need for constant monitoring.

💥To use a trading robot, you typically need to develop or acquire a trading strategy and program it into the robot using a programming language or a dedicated platform. The strategy can be based on various indicators, technical analysis techniques, or fundamental factors. Once the robot is programmed, it can automatically execute trades based on the defined rules.

⚡️Trading robots are commonly used in various financial markets, including stocks, forex, cryptocurrencies, and commodities. They can be used for different trading styles, such as scalping, day trading, swing trading, or long-term investing.

💥It's important to note that while trading robots can be powerful tools, they are not guaranteed to generate profits. The effectiveness of a trading robot depends on the quality of the underlying strategy, market conditions, and proper risk management. Traders should thoroughly backtest and evaluate their strategies before deploying them with a trading robot and closely monitor their performance to make necessary adjustments.

⚡️Trading robots can be a valuable tool for traders, offering automation, efficiency, and potential benefits. However, it's essential to understand their limitations and use them as part of a well-rounded trading approach.

Algo trading: What it means for Stock market? Part 2

2020-07-29T13:57:19Z

In previous time we’ve reviewed and analysed trading software for algorithmic trading. Let’s continue our analysis of trading systems.

- The next system will make volume analysiss of orders by tool and will determine the largest one. This system we call - Front running. A robot makes a decision where the largest order holds the price and force traders to trade in opposite direction.

- Another popular trading system is arbitrage algo robot. By trading with this robot the trade continues by the tools where correlation of is almost equal to 1. By tool we meant stocks and futures. Shares of the same issuer in different markets are also used. The robot monitoring price flow of financial instruments and make mirror trades, sells one out and buys another to balance the price. One of such robots is "Edward - scissor hands" which is a product of StockSharp company and able to do arbitrage trading and make a profit for traders.

- One of the most complex in terms of knowledge and technical base is volatility trading. The original principle based on buying options of different types, taking that a potential growth of volatility of a securities with expectation that the volatility of a certain securities will growth.

All represented types of algo trading have a myriad of trading systems. Our company developed such programs as S#.Designer which allows traders to trade in any direction. The trader have an opportunity to build a robot with help of constructor and sets any parameters for strategy.

More about S#.Designer you can find on our website.

Market data, timeframe, tick.

2020-03-24T21:14:24Z

Today we are looking at a very important element of exchange trading, without which the trade itself would not make sense, since without information about the positions of trading instruments, trading would turn into chaos.
So quotes of exchange elements are data that allows market players to know in real time any changes that occur with trading instruments. Changes in price, volume, and other information contained in the exchange quotation.
The exchange quotation plays a major role in the analysis and testing of trading strategies. Getting market data of stock quotes is the key to correct testing of the trading robot. Sometimes getting market data is burdened with conventions: paid content of resources, limited data period. However, the Hydra program allows you to download market data from a huge number of sources for free, as well as the Designer program, which is clearly shown in our tutorial video.

In addition to the information that market data carries, the important value is the selected data timeframe.
What is a timeframe?
Timeframe — the time interval used for plotting stock price charts.
Its main task is to allow you to visualize graphically the trend of changes in the parameter of the exchange quotation. For example, you can see how the price changed over equal periods of time.

Let's consider the main element of the timeframe – candles. Candles are formed within the time period set by the trader, so we can see how the price changed during the week or during the day.
A candlestick chart can give information about the maximum and minimum for the period set by the timeframe, and show changes in the volume of quotes. they can tell us about the maximum and minimum prices for the corresponding period, and we can use them to see the opening and closing prices.

At the same time, to get a more detailed movement of parameters within the timeframe interval itself, you need to use tick data, from which the chart is also built. The tick chart is the most accurate, since it gives a detailed change in data, not the final one for the period.

Let's look at how timeframes are designated:
M-means a minute (for example, M4 is a five-minute time frame).
H-indicates the hour (for example, H1 is an hour timeframe).
D-means day, sometimes the value "Daily" is used (for example, D10 is a ten-day timeframe
W-means week, and the term Weekly is also used (for example, W2 is a two-week timeframe)
MN-means monthly, it can also mean Monthly (for example, MN3 – a three-month timeframe).
Y-indicates a year (for example, Y5 is a five-year timeframe).
Older timeframes consist of younger ones, so for example, you can create a ten-minute timeframe from two five-minute ones.

Different timeframes can be used for different purposes:

Minute and hour time frames:
Often used for trading method of scalping, derating, scalping.
Short timelines are used for faster trading, often limited to one trading day.

From hourly to daily timeframes
They are often used for medium-term trading. The most moderate trading speed, it is often chosen by novice traders.

From daily to annual timeframes.
For the most part, these timeframes are used by investors who place their capital for a longer period, with the prospect of generating income in the long term.

So, we have considered the main types of time frames. Of course, successful trading consists of using different timeframes. The combination of them gives the most optimal solution for increasing the trader's income. This is why all our products from Designer to Shell can work with different timeframes, and Hydra allows you to choose several timelines for downloading at once.

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.

What are futures and options, and how to make money on them?

2020-02-18T14:05:15Z

Today, the concept of futures and options is one of the most frequently uttered in the market. Let's get acquainted with these financial instruments, give them concepts and consider the mechanism of their use.
Futures and options are derivatives, and they are also called derivatives. When buying these financial instruments, the trader does not get the asset itself (stock, bond, etc.), but a contract – an opportunity to perform a purchase and sale operation in the future, at a fixed price. Simply put, a derivative is an insurance that protects the trader from possible adverse fluctuations in the price of the main asset

Little history.
Initially, derivatives were created to reduce the possible risks of producers of certain assets in the form of goods.
Let's look at a simple example:
Company A produces flour, which is its basic asset.
Today, on the conditional market, company A can purchase a contract for the sale of 10,000 tons of flour for $100, with a sales period of 3 months.
In fact, after 3 months, company A can sell its flour for a fixed $100, despite the fact that the cost of flour may fall to $80. With this contract, the company predicts and fixes its income, which will be $1,000,000, and the contract is called - futures, a contract "for the future".
There is a possibility that the cost of flour will increase to $120 per ton, and in this case, company A will receive less than $200,000, since the market value of 10,000 tons of flour will be $1200,000.
The buyer of such a contract can be company B, which is engaged in the production of bread, and therefore the market price of flour is also important for it.
A private trader needs derivatives in order to get a fixed price of a purchase and sale transaction, such as a stock or currency, as well as an asset that cannot be purchased by a trader, such as oil.

Let's talk about which futures and options are the most popular in the world right now. Today, the most" popular " are derivatives for currency, stocks, precious metals, and oil.
It is worth saying that a little more than 10 years ago, the purchase of a futures contract meant the delivery of a real asset, that is, in our case, the delivery of flour. Today, the lion's share of derivatives are non-deliverable, and on the day of the end of the contract, counterparties are paid in money.

Let's look at the mechanism in our example.
So by the end of the contract, company A must receive a fixed $ 1,000,000 under the terms of the futures contract, which must be paid by company B.
Since their derivative is non-deliverable, at the end of the contract period, company A will not supply flour to company B.
What's going on? Company A displays the tonnage of flour on the commodity exchange, with the possibility to sell it to any company, including company B. the tonnage is received at a warehouse accredited by this exchange.
At the same time, company B has the opportunity to purchase its 10,000 tons set by futures from another company and receive them at another warehouse accredited by the exchange.

The price of flour may change, and may not be equal to the set price in the contract.
- Let the price drop to $80 per ton. In this case, company A sells its asset at $80 per ton, receiving $800,000, and the remaining $200,000 is paid to it by company B, so in total, company A will receive $1,000,000.
At the same time, company B will buy 10,000 tons of flour for $80 from another supplier, spending $800,000, and with the amount of future compensation paid to company A in the amount of $200,000, its total expense will be $1,000,000, as planned.
- If the cost of flour increases to $120, in this case, the difference will be paid by company A to company B.

Many novice traders have a question about the possibilities of trading options and futures in various markets, for example, stocks and bonds.
The answer is Yes. However, there are restrictions related to the duration of such contracts.
In our example – 3 months. If the contract was conditionally concluded in June, it ends in September.
The value of a derivative always depends directly on the value of the underlying asset, and the value of both instruments tends to be equal. Because of this dependence, futures and options are called derivatives.
Traders earn money using derivatives, for example, on arbitrage transactions, but at the same time derivatives do not cease to play an important role in hedging operations – insurance of transactions.

Let's take a closer look at the features of both financial instruments.
Let's start with futures. Futures a contract that involves the sale of the underlying asset at a fixed price, with a set delay in execution-payment. Futures fix the purchase or sale price of the underlying asset at the expiration of the term, and the market value of the asset may change.
If the futures contract is non-deliverable, then only monetary payments between the parties to the contract are made on it. It is worth saying that the delivery of the asset does not necessarily have to be made on time, in other things, as well as the purchase, but in this case there is a probability of price changes, and the risk of loss of profit.

Consider the mechanism for concluding a futures contract.
The contract is concluded exclusively on the exchange. The seller puts his offer on the exchange with its price, volume, and due date. After a buyer appears who agrees to these terms and conditions. The seller can also choose a ready-made request from the buyer, which has a set price, volume and deadline for execution.
This list of applications is always present on the exchange, and applications often differ little. Any of the participants in the transaction sees this list and chooses the most suitable one for them according to the condition. This list is called a glass and is displayed in the program that traders use. The greater the depth of the glass, the more flexible it is possible to enter into contracts, viewing more offers and as a result choosing the most suitable conditions in the case of the buyer, and at the same time more likely to conclude a contract in the case of the seller. Some trading programs allow you to set the depth of order book, for example, Terminal, where you can set your desired depth. The order book in the Terminal program is shown below.

Obligations to execute futures are transferred to the exchange.
When the date of execution of the futures contract and the conditions under which the seller will be obliged to pay remuneration (if the price of the asset has fallen), the exchange itself transfers the amount to the seller's account and withholds this amount from the buyer's account. If there is a situation that the buyer's account of the contract does not have the necessary amount, then this will be a problem that will be solved by the exchange, not the seller.
The situation is the same in the opposite case if the seller must pay compensation to the buyer.
The exchange carries risks, so before entering into contracts, both parties make a cash Deposit calculated according to the exchange's formula. Most often, its value can be double the size of the fluctuation of the futures price in one day. So if the price fluctuation was 3 %, then the collateral may be 6% of the price of the futures contract.
The Deposit is refundable, and is returned to the account of the parties after the execution of the futures. If the participant refuses to fulfill the contract, the Deposit will be deducted from the exchange's account as compensation.
Sometimes there is a need for early termination of the contract, in which case its value will be equal to the value calculated by the exchange on the day of termination. That is, the exchange calculates the price of the contract on a daily basis, while it uses its own rules for calculating the cost, but focuses on the prices that are offered on the market by bidders.
As mentioned earlier, the price of the futures is slightly lower than the value of the underlying asset, but the difference is small. Sometimes there is a short-term gap that is associated with market situations, which allows you to earn using an arbitration transaction.
You can also make money on futures during the day. So the exchange recalculates the price of the futures, respectively, every day, when its price increases, it charges the difference between the value of the contract and its current value, while the amount of collateral also increases.
When the contract execution time comes, the price of the futures becomes equal to the market value of the asset.
In General, we can say that a futures contract is a convenient financial instrument that allows you to reduce financial risks. At the same time, speculative operations with this tool are quite complex and, often, it is possible to make money on them using automated tools, such as trading robots. For example, the trading robot "Edward".

The next financial instrument is an option.
This is also a contract, but not for the amount of the sale or purchase, but for the opportunity to buy or sell the underlying asset at a fixed price at a specified time.
By type of transaction options are:
- Call option – an option to purchase;
- Put option – a sell option.

Option contracts are also traded only on the stock exchange.
The participant who bought the option has the right to refuse the transaction at any time if it is not profitable for him, while the seller of the option has no right to refuse it.
Thus, if the buyer uses the right of the transaction, the seller is obliged to fulfill it.
This condition makes this financial instrument very difficult for an inexperienced user, and allows him to trade confidently using various trading robots or trading systems, coupled with the ability to predict possible market situations.
An option can be said to be insurance against possible losses. In case of refusal, the buyer loses an amount equal to the value of the option, which is insignificant in comparison with possible losses. This amount is the seller's premium.
Considered example:
Trader A purchased 100 shares of Trend LLC at $10 per share. He plans to sell these shares in 2 months.
Trader B offers him an option contract for the sale of 100 shares of the Trehd LLC, with a period of 2 months for the price of $15 per share. The option price is $100.
Let's assume that the transaction took place, let's consider two possible scenarios:
- Let's assume that the price of the Trend company's shares fell to $7 per share by the time the option was exercised. In this case, trader A will not only not lose, but also earn.

$1500 (optional sale) - $1000 (initial costs) - $100 (seller's premium) = $400 -profit

.
- Let's assume the share price has increased to $17 per share. Thus, the trader had to waste $100 on the purchase of the option.

$1700 (optional sale) - $1000 (initial costs) - $100 (seller's premium) = $600 -profit

.

And without the option, the profit would have been $700.
An option, like a futures contract, is a non-deliverable contract. If the buyer uses the option, the seller will simply pay the difference between the current price of the asset on the market and the option price.

As mentioned earlier, trading on the stock exchange using options is quite complex, and a market participant needs to be able to predict situations. For call options, you must set a price that will be lower than the expected price after a set period, for a put option, on the contrary, higher than the expected price.
Option prices are calculated using statistical data on fluctuations in the asset value. Many users are helped in this by various programs, trading strategies, and trading robots that calculate situations using market data. which for example can be obtained in Hydra.
The one who sells the option is exposed to greater risk, its profit is the value of the option, and the loss is unlimited, as it depends on the price fluctuation.
Any transactions with derivatives are associated with various risks. The task of the trader is to choose the optimal solution, including the choice of an asset, a trading platform, a strategy, and a trading robot. Manual trading does not bring the necessary income on speculative transactions, so working with trading robots makes the trader's work profitable if the conditions are chosen correctly.

Arbitrage trading. Principles, types.

2020-02-04T18:52:36Z

What is Arbitration, general concepts.

Recently, the concept of Arbitration has been found quite often in trade. What is Arbitration?
Arbitration is a method of profit that minimizes the risk of loss by using the price difference for the same asset in different markets.
Today, this mode of trade is a commonly used trade tactic.
Let us consider what this mode of trade consists of.
The point is to sell the same asset at a higher price in one market and purchase the same asset at a lower price in another market.
Such trade is one of the most important components of the market, and most traders seek to conduct such trade, effectively reducing the possibility of loss to a minimum.
Although the nature of arbitration consists of price differences of one asset in different markets, this strategy can be applied to two assets with similar prices and portfolio volume.
Consider what the arbitration portfolio is and its properties:
- Arbitration portfolio - portfolio of assets, which does not require additional resources of the investor.
- The arbitration portfolio is not influenced by any factor, that is, has zero risk.
In fact, for an investor, an arbitration portfolio is a tool that allows it to receive a large return, while remaining unaffected by various risks.
A simple example of arbitration trade:
Suppose the value of asset A on one of the exchanges is $100, while the value of the same asset on the other exchange is $105.
A trader acquires an asset on one exchange, where its value is lower, and sells it on an exchange, where the value of it is higher. Thanks to this strategy, the trader gains profit, in the form of price differences of asset A on various exchanges.
This example is quite simplified, and is given only for the sake of clarity, in real trade the implementation of such transactions has its own difficulties.

Choice of pair in arbitration.

Let us once again define Arbitration Trade based on practical knowledge of it.
Arbitration trading is a method in which trading is carried out by means of differently directed transactions with an asset or assets having similar prices and portfolios, based on the difference in their value. In fact, the trader buys a cheaper asset and sells a more expensive asset similar to the first asset.
Often, the arbitration pair selects a base and derivative asset (for example, shares and stock futures). Both assets should have similar price dynamics - correlation.
However, correlation has the property of being broken for various reasons.
Such reasons can be related to various serious market changes and to the consequence of market inefficiency. Emerging correlation violations contribute to profit in arbitration transactions. In fact, the trader profits when the correlation of the underlying and derived asset is restored, after its violation.
Simply put, an arbitration transaction occurs when buying a cheap asset and selling an expensive asset when there is a difference between their prices in view of various factors. However, for the rest of the time, the prices of both assets tend to be equivalent.

Types of arbitration trade.

Let 's look at what types of arbitration are distinguished in trading:
- Time arbitration;
- Spatial arbitration.
Temporary arbitration implies that transactions occur with a time difference. This type of arbitration is characterized by a mechanism: buy cheap, and sell expensive, or vice versa, sell expensive, and buy cheap. To put it simply, such a mechanism is actually - a common speculative transaction made on the stock exchange market.
Temporary arbitration contains a risk, as during the period of time the trend may not change the direction of movement, that is, if the trader initially bought the asset for cheap, it is not a fact that after time the asset will not cease to be cheap, thus bringing a loss on sale.
The next type of arbitration is spatial. With this type of arbitration, a couple of transactions are bought and sold at the same time but at different sites. In such transactions risk is minimal, and sometimes at all reduced to zero, as a couple of transactions take place simultaneously, at the same time the trader should take into account not only the difference in the price of the asset, but also possible commissions, which should be included in the expenses and covered by the amount of profit.
In addition to the types of transaction time, arbitration is divided into trading methods. Let 's look at the main ones and explain them.
Spatial arbitration is divided into the following types:
- Equivalent arbitration;
- Regulatory arbitration;
- Calendar arbitration;
- Percentage arbitration.

Equivalent arbitration refers to such transactions in which the underlying asset and derivative asset (derivative) are considered. Since the price of a derivative always strives for the price of a basic asset, price schedules go alongside each other, sometimes intersecting and diverging.
If we simultaneously open equidistant positions on the selected asset and its derivative, when they have the maximum divergence, then closing the position when they converge will make a profit.
Regulatory arbitration is based on the difference in price caused by different rules in different jurisdictions (areas, countries, unions).
For example: due to certain legislation, an asset in one region is sold with a markdown, and its price is correlated with prices in other regions, differing by a stable markdown difference. In this way, by purchasing an asset in one region and selling it in another, you can earn a profit in the amount of a markdown.
Calendar arbitration is based on the difference in price arising between futures on the same asset but having different delivery times. This difference is called a calendar spread. The subsequent trading mechanism is similar to the equivalent arbitration method.
The last type is interest arbitration. This arbitration takes place on the foreign exchange market (Forex), and there are two types:
- No forward coverage;
- With forward cover.
The essence of arbitration is that the currency is bought and placed on a deposit with a set percentage. The currency is then sold at the current market rate. If the currency purchase occurs with the sale of a forward contract for the same amount, arbitration with forward coverage. With this type of risk is minimal, and for frequent absence.
If the purchase is made without forward support, arbitration without forward coverage. Such arbitration may be accompanied by a large risk based on a change in exchange value, which may result in a loss that is greater than the percentage of income on the deposit.
Triangular arbitration is also common in the Forex market. Let 's look at it with an example:
The trader buys EUR/USD, sells EUR/GBP at the same time, and buys USD/GBP. An equilibrium triangular contour is created. It turns out that the trader bought Euro for dollars, sold Euro for Pounds, Bought Dollars for Pounds. Thus, a closed chain is obtained, on the imbalance of which profit is made.The scheme of such arbitration is shown below:

Conclusions

Arbitration trade has gained a lot of recognition among traders. A large number of approaches to solving the problems of arbitration trade, a large number of methods used to implement the tasks make this kind very flexible, and the absence of risk or its minimum value further popularizes it.
However, it is worth saying that the strategies of arbitration to direct, are related to the rate of reaction of the trader to changes in the asset. This leads to various requirements that promote successful trade:
- Fractions of a second play a major role in arbitration strategies. Therefore, such trading systems require good software. It can be represented by ready-made trading robots. For example, StockSharp offers the robot "Edward", which allows you to work using the trader's arbitrage strategy and is capable of quick and flexible configuration.
High-quality software is especially important when working for Forex, as the number of traders is high. Therefore, many prefer an individual approach and create trade robots on their own through various programs. Trading robots are mostly written in powerful C# or C++ languages, using libraries such as S#.API and Interactive Brokers API.
Recent years have also received designers of trade strategies TSlab and S#.Designer, which allow to create trade robots without programming.Below is an example of a trading robot created using S#.Designer, the graph shows the moment of divergence of assets and their convergence with the subsequent transaction by the robot.

Application of the latest software leads to reduction of risks and improvement of the mechanism of work and as a result to increase of profit.
- It is important to remember that the strategy, even if there is perfect software, is profitable, if the income will exceed the possible risk and all broker commissions.
- It is worth remembering even using a trading robot, the risk can not always be reduced, so the trader must constantly manage his strategy, improve his tools and his knowledge. Learning new principles that can be applied in trading can make a trader a pioneer in making profits.
It is necessary to know that arbitration strategies can and should be combined with other types of exchange trade, which will give additional opportunities in income generation.

FAQ on Aalgorithmic trading. The history of algorithmic trading.

2020-01-27T15:09:19Z

The start and emergence of algorithmic trading can be considered the 98th year of the last century, when the us securities Commission (abbreviated SEC), decided on the possibility of using electronic trading platforms, and as a result, the use of trading robots for algorithmic trading.

All this gave rise to a leap in technology in the field of trade.
There are several periods that are particularly important:
- the beginning of the 2000s, this period of technology allowed you to make automatic transactions in a few seconds, despite the low speed it was a breakthrough, according to the SEC calculation, robots account for less than 8% of transactions.
- the end of the 2000s was characterized by an increase in the speed of transactions up to milliseconds, during this period the number of transactions made by trading robots exceeded 55-60%.
- late period since 2010, the number of use of trading robots has decreased, and amounted to about 45-50%. Experts attribute the decline in usage to an increased number of errors and failures of trading robots.
Today, algorithmic trading (HFT trading) is one of the most important components of exchange trading. Not only private traders, but also large companies-invest. banks and funds use trading robots in their work.

The annual investment of companies in the development of tools for algorithmic trading is growing, and the result of such developments brings its own income.
StockSharp has been providing traders with all the necessary tools for algorithmic trading for many years, starting with connectors for exchange trading and ending with software that allows them to work on all trading platforms around the world.
You can find more information about the list on our website.

FAQ on Algorithmic trading. What is Algorithmic trading?

2019-12-24T15:37:52Z

The concept of algorithmic trading there are two values:
- Algotrading -an automatic system that allows you to open trades within the created algorithm, without the participation of a trader;
- Algorithmic trading – a method of execution of a large order, in which the order is automatically divided into parts, and is submitted consistently according to the established rules.

In the first case, algorithms are needed to make a profit, using automatic market analysis and opening positions. Such algorithms have other names such as "trading robot" or "Advisor".
In the second case, the algorithm is used in order to simplify the work of the trader in manual trading when making transactions in large volumes.
StockSharp company pursuing its goal to facilitate the work of the trader and bring it to a higher and more profitable level, has developed several programs to help the trader in this.
Among these programs is S#.Designer.

It allows you to create trading robots for algorithmic trading.
Our company has created a program that will help the novice trader to create his strategy with the help of dice. In fact, it is a constructor that requires a trader only to understand the market and the developed strategy, which is quite simple to implement and implement in trading processes. More information about the program can be found on our website.

What is a trading robot?

2019-10-28T14:49:18Z

The growth of activity in the world markets among traders, as well as the constant progress of technology, led to an increase in the speed of actions carried out by players on the trading floor.
Today, many traders actively working with various financial instruments prefer trading robots rather than manual trading. This is largely due to the speed of operations and their volume.
Let's see, what is a trading robot? A trading robot is a special program created by a special algorithm, according to which it conducts trading operations. [nerd]
Let's take a closer look at the features of such programs.
The trading robot program allows you to fully or partially take over the process of working on the trading floor. The trader, as the operator of the trading robot, has the possibility of full control over it, which allows the robot to adjust the trading robot, make changes to the program code or change the algorithm.
The trading robot in Autonomous operation independently makes decisions on orders and transactions, according to the established criteria of its algorithm, with intervention in the user's process, operations can be carried out in manual mode.
The program code of the trading robot is based on calculated and thought-out mathematical sequences. Keeping track of different data such as indexes, indicators and other market data obtained from the exchange. The trading robot program decides whether to buy or sell certain assets. The speed of reaction to market changes, allows the trading robot to make much more transactions, respectively, potentially bring greater profits and reduce losses. [nerd]

Let's return to the main task of the trading robot. We can say that the task of a trading robot to simplify trading for a trader is not the main one. The main task of the trading robot is to be able to implement through programming trading algorithms that are difficult or impossible to implement in manual trading. Simply put, a trading robot is a set sequence of actions for making a trade.

From the total mass of trading robots, it is necessary to distinguish three main groups that differ in the algorithm of work or the type of strategy.
- Trend (directional) or directional;
- Countertrend;
- Arbitral.

Let us consider in more detail the features of each type of trading robots.
1. Trend or directional robots. The purpose of the robot is the fastest response to the trend of the market, in other words to track in which direction the market has turned. Depending on the direction, the trading robot automatically opens a position either by selling or buying. Accordingly, if the market changes its direction, the trading robot performs the opposite action as quickly as possible, opening a position.
2. Countertrend trading robots. Their goal is to track price rollbacks. This trading robot monitors price rollbacks occurring in the flat position of the market and places orders based on the established algorithm.
3. Arbitrage trading robot. This trading robot is almost the most popular type. A trading robot such as "Edward", for example, makes a profit by determining price differences between similar or identical instruments in different markets. In fact, he buys in one market, sells in another, compensating for the difference and making a profit.

Another way is the separation of robots:
- Candlestick. These are trading robots that use candlestick data to determine signals for placing orders.
- Indicator. These robots use indicator data to open an order.

Let's talk about building a trading robot. The very writing of program code is not a difficult task, reduced to the knowledge of programming languages. It is much more difficult to find the right way to create a trading algorithm on the basis of which a trading robot is created.
Today, up to 50% of transactions on trading platforms are made by trading robots. Trading robots are rightfully considered one of the most reliable and effective trading tools. There's an explanation :
- Trading robot simplifies the work of transactions with a large volume of the lot, dividing the application into smaller parts and making transactions in parts;
- Trading robot reduces the labor of the trader, making trading operations automatically. This contributes to an increase in the volume of transactions, increase the profits that trade brings, and, importantly, reduces the possible loss;
- While remaining automatic, the trading robot can always be switched to manual mode, that is, it remains completely under the control of its owner;
- A huge list of tools and methods that can be used by a trading robot, allow us to say that the trading robot makes it possible to realize the most complex mathematical problems for trading;
- The trading robot does not have the criterion of emotionality, in fact, it soberly operates its inherent mechanism. Does not panic in a stressful situation.

When analyzing trading robots, a trader must choose the right path for himself, on the basis of which he will be able to choose a robot for himself. A trader should understand that a trading robot is not decision for 100% success. In addition to the trader, it is important to know the platform for the implementation of such trading robots. There are quite a lot of them (TSlab, S#.Designer).

Summing up, we can say that the trading robot is reliable and convenient functionality in the arms of the trader, the most important thing is to use it correctly when conducting exchange trading.