Algorithmic trading accounts for approx. 20% of the institutional Forex volumes. Until recently, fast and efficient algo bots were too expensive to make sense for most retailers. It has just changed thanks to the advent of point-and-click algo builders like Silicon signals.
The challenges of manual trading
In traditional manual trading, a trader will formulate a strategy and back-test it with previous data. If the strategy seems to work, the trader will open and close trades when the real conditions meet the strategy criteria. This approach has two basic problems:
1) Emotional trading. Traders often find it difficult to stick to their strategy when emotions are running high, especially when it looks like they are losing money.
2) Lack of time. Dealers are people too! They need to sleep, eat and spend time with their families. But a jack of all trades is none of the masters. Well-meaning manual traders will inevitably miss out on trading opportunities.
The algorithmic solution
Algorithmic trading (algo trading) means using a computer program to execute a strategy. The trader formulates a strategy and a programmer converts it into code, usually using languages like Python or R. The result is called a bot. It executes trades automatically when the conditions match the strategy. Bots have 3 major advantages over humans.
1) efficiency: a bot never misses an opportunity and can perform thousands of trades a day.
2) Speed and accuracy: a bot is performed instantly, almost without slipping.
3) No emotions: a bot is not prone to panic, greed or excitement.
Example of bot code trading from databcience.com
If a strategy in itself is valid, a fine must give a higher profit than manual trading. As a result, about 20% of all Forex institutional volumes are generated by bots and over 60% of the volume in stock trading. So why do retailers miss out and not use the same tools as their institutional peers?
Cost is the biggest barrier. A programmer may not require much for an initial algorithm, but any consecutive change costs extra. Since a bot needs to be updated as often as market conditions change, expenses tend to hang up over time. Most retailers’ volumes are simply too small to justify the expense.
Are Forex Signals a Viable Alternative to Algo Bots?
Instead of algo trading, many retailers subscribe to so-called Forex signals. These are buy & sell warnings provided by professional traders and usually come from the professional profession’s own algo bots. Most signal subscriptions cost from $ 30 to $ 100 a month.
Signals can be useful if you do not want to formulate your own strategy, but they are not a substitute for algorithms. You still have to execute your trades manually and pay a fixed fee whether you make a profit or not.
Creating your own algorithms with silicon signals in 7 steps
The optimal solution for retailers is to be able to build algo-bots and create Forex signals without writing any code. Silicon signals is one of the first companies in the market to let you do just that. Its point-and-click algorithm builder is easy to master, even for novice traders with zero knowledge of programming. The Algo builder is only free for a limited time.
Designing a free trading algorithm with Silicon Signals involves 7 simple steps:
1) Define a strategy. The site has a collection of how-tos for different strategies.
2) Select the conditions in the Silicon Signals editor. You can choose from 10 Forex trading indicators, such as MACD and RSI. For example: ‘When EUR / USD 14-day SMA crosses from above and below EUR / USD 28-day SMA’.
3) Set the actions. Here you choose which action the bot should take when the conditions are met: buy or sell an asset.
4) Money management. You need to determine the trade amount and set the values for Stop Loss (SL) and Take Profit (TP) as well as the number of times SL or TP can be activated before the strategy stops running.
5) Sample. The trader can back-test the strategy using previous market data and / or paper test it on current data without investing real money in it.
6) Download the expert advisor. This is a file to be copied to the data folder on the MT4 or MT5 trading platform.
7) Activate the algorithm in the trading terminal.
How much can you rely on bots?
MT4 interface with the expert advisor runs
Once enabled, a Silicon Signals algo bot will start generating MT4 signals and execute trades according to your strategy.
A do-it-yourself bot has all the benefits of a bot coded by a professional programmer. It is fast, accurate and can save the user hours every day. Best of all, the system is completely free, at least for now.
One difference: Silicon Signals allows users to employ up to 10 technical indicators, while MT4 supports dozens. That said, the Silicon Signals menu of technical indicators includes the most important indicator of trend, momentum and volume. That’s a lot for the retailer.
How much monitoring a bot needs is another matter. No strategy can continue to deliver good results forever without adjustments. Although your bot may remain relevant for as long as market development lasts, you should limit the values from time to time. With Silicon Signals, it only takes a few minutes. Plus, the system includes a handy equity chart that shows you when and how you made or lost money.
Constantly keep track of pricing measures to capture any trend reversal. Any significant change usually requires switching to a different strategy, so you will be ready with some draft strategies. Fortunately, it takes considerably less time to build a new algorithm in Silicon Signals than to order one from a programmer.
Summary
Algo trading can deliver significantly higher returns than manual trading, but it is only as good as the underlying strategy. Silicon Signals frees traders to devise a winning strategy. Resellers can finally build algorithmic bots quickly without writing a single line of code and doing so for free. Such bots are easy to integrate into the most popular terminals, MT4 and MT5.
The key to success is to continually study price action, monitor the market, and refine the algorithm when necessary. Silicon Signals can do most of the ‘heavy lifting’ for the trader, but the most important task – designing a strategy – remains up to you.
Silicon Signals is currently free to use. For more information, go to official website.