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The Evolution of the Retail Algorithmic Trader

To me, algorithmic trading is the obvious progression for financial trading. Even for retail trader like myself, the technology and power that is available is astonishing. Not so long ago, the advantage was with the large institutions with big pockets to pay for the best technology, best data feeds and best connectivity.

Now it’s all relatively affordable to everyone and I believe, this gives the retail trader a significant advantage. The retail trader is nimble and doesn’t have to go through the bureaucracy of corporate decision makers unlike their institutional counterparts - they can respond quicker to the ever changing markets. They are not constrained by overly strict risk parameters… big corporates are all about lowest possible risk but this also stifles profits…

Ideas, thoughts, strategies are all decentralized and freely available on forums, YouTube and other social platforms.. but quite often, these websites are blocked by companies within their networks. There is a vast amount of information available to retail traders, almost too much but all useful so long as you know how to filter out the noise.

The other thing is trading psychology, it took me about 10 years in total to understand what it was and how to fix it before I was able to become a consistent and profitable manual trader. I believe that if I had started out with algorithmic trading, it wouldn’t have taken so long… Algos open and close trades, that whole part of trading psychology associated with these tasks is no longer of concern.

The other limitation as a human trader is our physiology… we get tired, we get hungry, we need to sleep, we can’t multitask…all these impact the trading performance. Algorithmic trading also eliminates these limitations.. you can leave your algo running 24 hours a day.. it’ll trade whenever there’s an opportunity as determined by your system even if it’s 3am in the morning. Computers never tire too so you can leave them running… of course, Windows can crash but that’s a different conversation! The biggest advantage is that rather than trading a few strategies, the computer can trade hundreds if not thousands of strategies and positions all at the same time…

Of course, there’s a learning curve also with building algorithms… good backtests don’t necessarily mean good results in live trading.. there are many factors which the backtest don’t capture such as slippage, spreads, news etc. However, nothing beats good old fashioned live testing.

I’ve had a Darwinex trading account that I was trading for a few years, due to the human elements, it did ok, but nothing to sing home about.. this year, I restructured it completely.. replacing my manual trading with algorithmic trading. These are algorithms which I’ve built using AI technology and ones that I’ve tested on live, albeit small, accounts for over 6 months. I’ve previously mentioned that you need a portfolio of them to ensure diversification and to reduce risk so it’s currently running 7 algos. I say "currently" as I’m always monitoring it.. if an algo stops performing, I replace it with one that is.

In the past 6 months it’s won 3 rounds of funding and as I’m writing this, I’m hopeful that it’ll win another at the end of the month. It’s currently ranking 10th place out of over 3500 listed Darwins.

For 2021, I'm looking to put together a course to help those interested in doing this for themselves taking them from manual traders to algorithmic traders using Metatrader. Watch this space!

In the meantime, ff you're interested in learning more about my Darwin on the Darwinex platform, click here

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