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Which System Development Platform

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It´s been more than a decade since it´s possible to place a trade online. And nearly a decade since it´s possible to autotrade virtually any trading system through a publicly available software. Technically, today anybody with limited effort can design a trading system, backtest it, turn automated trading on and let the computer to do the trades in live account.

What choice of trading system development platforms do we have? The following list is far from exhaustive, but some of the most popular options are:

Tradestation. Easy to use. The programming language is the proprietary Easy Language. You can describe the trading system in a language which is quite close to describing it in English language. All major stock, futures/options exchanges and forex supported. However, you can use it only with one broker – Tradestation Securities. The software is free to use for brokerage customers, but there is a subscription-only service for $250/month plus data fees.

Metatrader. Widely adopted by forex brokers and traders. There is a proprietary programming language, but it is based on C (Metatrader4) and C# (Metatrader5). The manual rather insufficiently covers even the basic operations and some programming background is helpful. Available to end-users free of charge.

DIY in a general-purpose programming like C, C# or Java. This is the choice of big operators like larger funds.

Other options include: MatLab, X_Trader (Trading Technologies), Wealth-Lab, TraderStudio or Ninja Trader, eSignal, FXtrek, MCFX, . These software platforms, except for X_Trader and Ninja Trader, are not built for automated trading.

Which one is the best? For an individual without programming background or a small organization, I guess that Tradestation would do the job. It’s easy to use. If the strategy is simple enough, the chances are you’ll be able to program it in the shortest possible time with Tradestation. However, no portfolio testing is not available in Tradestation. If you’re looking for a super-simple solution (with limited functionality, though), then nothing gets more simple than Ninja Trader.

Technically, general-purpose programming language provides the most flexibility and versatility. But it is not suitable to everyone. Imagine you’ve a business proposition (a trading strategy), but you ‘ve to express it in fluent Chinese (a language you don’t know). So to make the proposition, you’ve got to learn Chinese first or hire an interpreter. The same is about programming languages – it takes long time to learn and master it, it’s not worth, if you only want to test a few strategies.

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Written by A.S.

January 9, 2011 at 7:21 pm

Sources of Trading Systems

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The ecosystem of automated trading develops fast. Capital allocated to system trading through industry leaders, such as Covestor or Collective2, reportedly grows by 50% annually.

There is still a plenty of room for growth as the investors ¨chop off the old block¨, i.e. disallocate the funds from chronically non-performing and increasingly risky traditional investments in stocks and bonds.

I here list 8 sources for you to choose as a provider of trade signals for your system trading account. Those sources are the ones likely to be used by both emerging system developers as well as investors.

Collective2
Collective2.com or C2 is an internet-based company. C2 collects performance data of various trading systems, independently verifies such performance data and makes the systems available to subscribers to trade in real-life trading accounts. At the time of writing there are about 7’000 trading systems registered on C2.
The way it works is — you go to C2 web site, register as a user, find a trading system which, as an example, shows 88% annual return, make a few clicks to set the system up to send the trades to your brokerage account and, if the systems lives up to the expectations, you have just arranged for an investment with 88% annual return.
C2 promotes itself as think of Collective2 as „do-it-yourself” hedge fund.
C2 works only with hypothetical data, although it checks all the signals in real-time and provides both estimates (slippage, realism factor) and tools for investors to evaluate what performance in live accounts would look like.

Covestor (and cv.im)
Covestor is one of the best-managed and innovative trading system aggregators.
Covestor displays performance data from live trading accounts and is limited to stocks only.

Zulutrade
Zulutrade deals with hypothetical forex signals only.
Zulutrade is probably the fastest growing of all system aggregators. It takes only a couple of minutes to sign up as a system vendor. Zulutrade is equally easy for investors as account opening procedure is straigthforward and easy with any of the selected brokers.
There are no fixed fees for neither system vendors, no investors. Systems can be added and removed from trading in live accounts with just a few clicks and at no cost. Fee for the services is pay-as-you go in form or bid-ask spread markup. Such spread mark-up (about 2 pips round-turn for the most liquid currency pairs) is then shared between Zulutrade and the system vendor.

Tradency
Tradency service is available through selected forex brokers, including several major retail brokers, such as FXCM.
Tradency system performance data is hypothetical rather than based on live account trade logs.

Fxbees
If you´re looking for system aggregator service for forex signals based on live accounts, then Fxbees.com is for you.

Myfxbook
Myfxbook positions itself more than a community of forex traders rather than system aggregator service provider.
Forex traders allow data from live forex accounts to be explained on Myfxbook website. Potential investors can review the data and contact the trader directly for signal delivery terms and conditions.

AlphaClone
AlphaClone compiles data about major equity positions from 200 major hedge funds and institutional investors from their public filings.
There is a time-delay involved as such public filings with SEC are made quarterly. If you feel comfortable to ¨clone¨ positions of, say Warren Buffet, this is the service to use.

Alpari PAMM
Alpari is a Russian-owned forex broker with operations in several countries, including UK and UAE.
Alpari customers may enable their live account performance to be available for public disclosure. If done so, the live account performance is ranked and any investor may open PAMM account to copy the trades of the most profitable traders.
The fees related to PAMM account are structured as performance fee. Under this arrangement, investor pays a share of profits as a performance fee and such fee is shared between the broker and the trader.

Source: free e-book Be Your Own Hedge Fund Manager.

FXCM and Alpari Use Tradency Service For System Trading

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Somewhat disappointed to find out that FXCM and Alpari both use a trird-party solution for trading systems. My expectation was a compilation and ranking of trading systems from their own customer account information. Instead, they use Tradency.

However, Alpari has a separate managed account service called ¨PAMM-account¨. The service allows investors to follow trades from live accounts. The fees paid by investors to traders are structured as performance fee.

Written by A.S.

May 26, 2010 at 8:09 pm

FXCM exceeds expectations

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Around New Year within about a week I had several occasions where, due to errors of service providers, I incurred extra costs. It´s something what happens not too often to me and several episodes within a matter of days is something extraordinary. One was a cancelled Ryanair flight which I´ve booked for my family to visit me on New Year holidays. I had to book another flight with a different company and my total cost was more than €1´000 of which Ryanair reimbursed less than €100. For both my wife and the two little kids it was first ever experience with Ryanair and the kids are very eloquent that they never ever will fly with Ryanair again. Particularly, because they were very satisfied with the service from the other airline. I´ve sent a compensation claim to Ryanair, but estimate my odds of receiveing any compensation as very slim … I look at this as the true cost of flying at about 1/3rd of cost, if compared to other airlines … works most of the time well, but be ready to pay when it fails — they won´t take care of you and kick you out in cold and dark to save on costs, including fair compensation budget.

A few days later there was a similar episode. Broker missed a predetermined stop-loss. Market was relatively calm, execution was delayed by about 2 hours and 45 minutes and the fill was about 28 pips or about $900 worse than it should be at a predetermined stop-loss level. I knew that there is some problem with the system — it funtioned strange, didn´t accept new trades … In a short online communication they admitted that there have been a system outage. I sent a short description of the problem with all the details to FXCM. I estimated my chances for compensation as slim since in the account documentation there is small print that most of us never read, but we know that it transferrs all possible risks to customers. As well, I started to consider moving the account to another broker. Nevertherless, the amount has been credited back to the account, as well as I´ve received highly detailed and professional summary about the incident and consider the issue fairly resolved.

Written by A.S.

January 24, 2010 at 11:51 am

Posted in FXCM