Algorithmic trading strategies are making a large foray into the retail sector now, as they take a lot of the emotion out of trading. After years of experience, I can tell you certainly that the psychology of trading is probably the Achilles’ heel for almost everyone. While it seems quite straightforward to look at a chart and decide to make a trade or get out, the reality is that when you are watching your profit and loss statement go up and down erratically, things get much more difficult. This is why demo trading is only so good, and the reality is that trading with real money is 10 times as hard.

Enter the computer

Most professional shops now use a variety of discretionary, systematic, and most certainly algorithmic trading strategies. In fact, if you ever look for a trading job at one of the larger firms, one of the first things that are quite often mentioned is that you should have some type of programming experience. Quite often you will see Python mentioned, but there are other languages that traders will use. This is because what most traders do now is back test a strategy, and then plug that strategy into a program that execute orders over the longer-term. This takes a lot of the guesswork out of trading, and if there is a positive expectancy with the system, over time it stands to reason that the trader should make money.

Markets change

One thing that you should pay attention to though is that markets do change. With that in mind you should recognize that being an algorithmic trader isn’t a “one and done” proposition. Quite frankly, you will back test quite a bit and constantly look for new strategies. It is most commonly used to trade short-term charts, and therefore can be fooled by extreme amounts of volatility.

Systems can be bought

Trading systems can be bought, but keep in mind that most of the professional shops out there are using programs that they spend millions of dollars on using Ivy League PhD’s to write them. Because of this, you should be very cautious about buying a system for $99. That doesn’t mean it can’t work, but the reality is that you will need to back tested and not just plug it in and start trading real money. All things being equal though, if a system performs in a specific market condition, that is exactly what you should be using it for. Unfortunately, far too many people will use one system to trade every market in every time frame. Make sure you read the directions for its specific use.

Best algorithmic trading strategies (Now you are safe)