Mechanical Forex

I know that the dream out there is simply to go out, buy a trading system that “works”, load it onto your trading platform and start making heaps of money without having the slightest idea of how the market works or how to actually program a trading system. The whole idea of this is that you do not need to program or know anything and that you can “get away” with profitable trading without putting up all the effort and time all other profitable traders put into their systems. However – as I have said several times before – this approach is flawed due to several different reasons and it is obvious that you will not achieve success without knowledge and understanding. Programming becomes a very important part of what everybody willing to succeed in mechanical trading should know because it is the main key to the achievement of an in-depth understanding of trading strategies.

On today’s post I will share with you what I consider to be the 5 most important reasons why anyone interested in becoming successful through the use of mechanical trading strategies should learn to program, what programming allows a trader to do and why not knowing how to program will put you at a great disadvantage against those who do know how to use a computer to evaluate, test and execute their trading strategies. Within the following paragraphs you will learn why programming is so important, the extremely necessary things it allows you to do and why it makes it a lot easier to gain a true edge in the forex market. I will now tell you the 5 reasons why you should definitely learn to program if you want to become a long term profitable trader through the use of mechanical systems :

1. Logic understanding. If you do not know how to program it will be very hard to understand how systems work and how you can translate an idea into a mechanical system. Knowing how to program allows to have a logical mindset that will allow you to easily translate ideas into code and to understand what other codes are trying to achieve. By knowing how to program you will gain an in-depth understanding about the logic of trading strategies which have been coded and you will be able to use your understanding to build your own trading strategies. The most important part of this is that you will gain what people call “algorithmic thinking” the ability to translate ideas into specific algorithms that can be executed by a machine (you will be able to make strategies concrete).

2. Long term evaluation. I think that the biggest advantage a programmer has over someone who doesn’t use programming tools is that a coder can evaluate a strategy over a long period of time using simulations. This allows the coding trader to get a glance at how the strategy behaves in the long term while non-coders will need to perform exhaustive manual trading evaluations of their strategies and then trend them for extensive  periods of time in live trading before they know if they actually have any significant statistical edge. A coder can just put the strategy into a program, simulate it and know in advance if any statistical edge is possible.

–

3. Understanding of limitations. Another great advantage of being a coder – and a good reason why non-coders have a much harder time achieving success with mechanical strategies – is that a programmer can understand the limitations of simulations and the programming of trading systems so he or she knows when a system is giving a reliable representation of past performance and when it is simply exploiting some of the limitations of the testing software. Knowing the limitations of simulations allows a trader to code strategies with reliable simulations and to avoid falling prey to those who try to sell strategies based on the exploitation of these factors. People who lack this knowledge will not be able to distinguish between unreliable and reliable simulations and they will avoid to use any simulations due to the fact that they cannot establish their truthfulness.

4. Ability to create and automate. Another great advantage a programmer has over someone who does not program is that he or she can actually implement trading strategies into automated trading systems. A coder can take a given mechanical strategy and put it into code which can then be reliably executed by a trading platform without any intervention. People who are not coders are limited to either trading their strategy manually or paying someone to code it for them, this introduces an additional problem since – in the end – they are not aware if the coding of the strategy is appropriate or if it will trade reliably in the longer term. People who code their own strategies have the advantage of knowing what was coded and how to change it promptly if the need arises.

5. Understanding implications. While someone who is not familiarized with programming may be unaware of the long term implications around the use of certain coding aspects a programmer can understand the long term implications of these pieces of code and the possibly devastating effect they might have in the longer term. Learning how to program allows a person to understand how a given piece of code within an automated trading system may cause a program to be inherently more risky and how this risk can be removed. A programmer can also write code so that errors are reduced and increased reliability is attained.

I believe that programming is a necessary but not sufficient skill to become successful in mechanical trading. In reality people who are only programmers are usually not very good traders – more like very bad ones – because they lack an understanding about the market and sound money management techniques. This lack of understanding around the market usually leads them to implement strategies that “sound good” but which never work in the long term. Definitely it is not enough to be a programmer to succeed but learning how to program is a necessary skill for anyone who wants to become successful using mechanical trading strategies.

If you would like to learn more about automated trading and how you can learn to design and implement your own strategies based on sound money management and adaptability please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach to automated trading in general . I hope you enjoyed this article ! :o)