Algorithmic Trading

In stock trading, the two emotions that will wreck your chances of success are greed and fear. When greed kicks in, you’ll often take unwise risks, which ultimately wind up losing money. When fear kicks in, you’ll often hesitate and miss out on near perfect opportunities to make money. The reason why algorithmic trading consistently proves successful is that computers never experience greed or fear. They simply trade based on the odds and when they lose, they continue following their trading systems anyway while humans often panic and deviate from their trading system.

The way most stock trading systems work is by statistically turning a profit over time. That means sometimes the system will work and sometimes it will fail, often spectacularly. However as soon as you deviate from your system, you risk greater failure while if you stick with your system (assuming the system has been proven statistically accurate), you’ll always profit over time.

By eliminating human decisions, algorithmic trading earns consistent profits. In case you’re curious about developing your own stock trading algorithms, you can rely on an open source module called TA-Lib, which you can download here.

This open source financial analysis code, written in the C programming language, provides code for identifying favorable trading opportunities based on moving averages and candlestick charting patterns. By using TA-Lib, you can create your own program to identify the best trading opportunities and alert you when to buy or sell.

If you’d rather not fiddle around with an open source solution, one commercial solution comes from a company called Modulus, which sells technical analysis source code that you can incorporate in your own programs. FM Labs┬áis another company that sells technical analysis source code that you can use as well for a price.

By using your programming ability to do analyze financial opportunities in the stock market, you can put your brainpower to work and deliver financial rewards that could supplement or even surpass your current income. Just remember that when you use technical analysis methods to analyze the stock market, you’ll be relying on statistics, not blind luck, to help you make money in the stock market.

No matter how good any trading system might be, there will be times when it will lose money, but if you stick with a system over time, it will statistically earn you more money than you lose. You just have to be disciplined enough to follow the advice of your own computer program.

For many people, they dump their money in a mutual fund and hope that the mutual fund manager will pick winning stocks. If you don’t want to rely on hope and prefer to rely more on yourself, trust your programming expertise and develop your own trading programs. Who knows? You may be better at creating stock picking algorithms than you might have ever thought possible.

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February 23rd, 2014 by
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