Algorithmic trading is all about programming computers to trade financial instruments on your behalf. Programmers write algorithms for these tasks and then feed them into the computer, then send automatic buy or sell orders accordingly. This allows the trader to sit back and relax while still making trades whenever he pleases.
One of the first things that must be mentioned when discussing algorithmic trading is MetaTrader 4, or MT4 as it’s more commonly known. It’s often touted as being one of the best platforms ever created for trading forex. There are many reasons for this, but there are three main ones:
- Firstly it’s free to download, meaning that anyone can get their hands on it with no strings attached.
- It has an excellent charting package with most features included that most traders need.
- Lastly, but by no means least, is the fact that it’s incredibly powerful and flexible, offering almost limitless possibilities when it comes to algorithmic trading.
One of the main advantages of writing algorithms in MT4 compared with other platforms is the immense flexibility when creating them; there are hundreds of functions available for use in an algorithm that can be modified using specially built indicators (more on these later).
This allows programmers to make their code as simple or complex as they want to, depending on how much time they have available and how many resources they’re willing to spend coding it. Furthermore, all this code can easily be translated into any third language such as C++, Python, and Java.
Algorithms and MT4
On top of this, these algorithms can be programmed to run alongside one another and interact with each other in many ways (i .e certain conditions will trigger other algorithms to execute). They allow programmers to easily make hundreds of different types of trades, all through the same platform.
Although admittedly, in the beginning, it may seem like an arduous task to learn how to do this efficiently, trust me when I say, “it’s worth it”. Algorithmic trading using Rakuten copy trade MT4 isn’t just beneficial not only for those creating them but also for those who wish to use them—knowing that they’re being correctly fed real-time market data and any news that might affect their beliefs about particular financial instruments.
One of the main disadvantages of programming on MT4 is that no strict rules state how one should create an algorithm. There are several different ways to do it, making it incredibly difficult for beginner programmers to learn this skill. Another disadvantage would be that if you’re starting with algorithmic trading, you may find yourself bogged down by other issues such as money management and risk management.
The importance of good coding practices
As mentioned earlier, these algorithms can interact with each other in various ways depending on what kind of strategy they’re running; this means that success depends heavily on good coding practices and careful asset allocation strategies. The latter will change depending on which strategy you decide to run.
One of the main factors that separate amateur algorithmic trading from professional is good coding practices. If your code isn’t efficient, then not only will you find it extremely difficult to track down bugs, but it’ll also run much slower than it should. This can be hugely hazardous for any trader using them, so always ensure you test your algorithms before running them live with real money.
The ‘if this, then that’ algorithms
Writing an algorithm aims to make a computer behave in a certain way – simply put, they’re just if and then statements combined with functions that allow us to get values from MT4 or perform actions. Below are some examples of how one might achieve these goals:
1) If the price goes above 500, then open short
2) If the price crosses above the 200-period SMA, then buy.
3) If MACD (12,26,9) is 0 and RSI (14) 50, then go long on the next bar.
4) If at the close of the candle price is above 200-period, SMA goes long on the next candle.
5) If ten candles in a row are green, buy the next candle.
As you can see, there are several ways to achieve these goals.