Want To Automate Your Trading Edge? Start Here

I have spent most of this entire year working on automating my edge. For my style of swing trading, the only discretionary input now is picking which setups I actually want to enter. Scanning, setups, triggers, sizing, stop/target placement, trailing stop etc. has all been standardized and taken out of my hands.

There was something extremely important that happened…

In the process of automating, I had to learn how to simplify my strategy into what a computer can understand. I have programming knowledge but you do not need a programming background to do this kind of work. To program something, it has to be synthesized and repeatable. An edge has to be synthesized and repeatable.

First off, if you are reading this and trade a strategy that you have proven to have an edge, all this work should have been done already. For you to have conducted a proper back test, it would have been done on a large sample size, which would have required some sort of computing, which would have required some kind of program, which would have required some code. That code is your edge.

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If all of this seems foreign, let’s take a step back. Allow me to be the programmer you just hired who is going to help you automate your edge from beginning to end. Take this seriously, take time to go through each question and find the answers for your trading. I will provide you with a brief example of mine to get a feel for what has to be done.

Mind you, this is just an introduction.

If you are to make this real, it will require many more considerations than what I am putting forward.

  1. What does a market have to do qualify as a setup? Think in conditionals (if/then statements). My answer for a long trade, “If a market makes a move above the upper Bollinger band and then pulls back to middle Bollinger band”.
  2. What does a setup have to do to trigger an entry? Now we have to give the setups a way to become real trades. My answer for a long trade, “If the market breaks the upper trend line of the pullback, go long”.
  3. What will cause a trade to be exited? We got into the trade automatically, now we also have to do the same for the exit. Your answer may be simple as the stop is hit and the trade is exited. My answer for a long trade, “If the first target is hit, sell half the position and trail a stop on the remainder. If the first stop is hit, sell the entire position”.

These were just quick and dirty questions to get you thinking about the work that has to be done to automate a trading strategy. I will also give a tip, if you think the work will take 6 months, it will probably take double that. You want to get this right. You do not want to get your strategy live without months of running on a simulated account to figure out everything and anything that can go wrong.

If you have any questions on the journey or in general email me at anthony@lonewolftrades.com or visit lonewolftrades.com. I know it isn’t an easy process so I will try to be as helpful as possible. Thanks for reading.


Twitter:  @TraderTorchia

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.