Goodness, Zerodha. Why are you always laying thick on how "backward" our markets are ?? So snobbish ! It's as if you are trying to position yourself as the messiah for the downtrodden masses that the traders are..It only ends up sounding like a hustle.
Ok, since this is the dominant strategy in the "developed" markets, can you give us some more statistics about it ? What is the success rate, rate of returns etc. for the algos ?? How does it handle the spikes (like the one caused yesterday by a tweet about the attack on White House)..?? What are your experiences with it etc..etc..
TP, our job involves also marketing and we are by default very passionate, so sometimes it might come out the way you have mentioned, but I guess it is good to have a broker who is passionate rather than not..
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About your query, not all algorithmic trading is the same. To clarify, we are offering a tool for algorithmic trading on technical analysis strategies, not on anything else... Also do note that we are not talking automated trading..
Success rate,rate of returns, everything depends on the strategy deployed. Does it mean we will give you strategy, which is a holy grail and guarantees money ? definitely not...
If you are a guy who follows technical analysis, we will teach you first how to write it is a code, once as a code you can actually see if it would have made money or not by backtesting.. Looking at the chart and waiting for your pattern to appear is an outdated way of trading and very high probability of you missing a few signals.. So this will also have an option to go live, where you can have preset order size and stop loss and run it as a script not just for 1 contract and 1 strategy, you can do it on multiple stocks and multiple strategies. In TA, once you decide to deploy a strategy, it is very important that you don't miss any signal otherwise the profitability can go awry, this will ensure that..
But does your world change if you are not following technical analysis, no nothing changes. This is only for people who believe in technical analysis and the odds of winning goes up immensely..
This was the first question asked yesterday, do read the answer and it is upto you to decide if it adds value or not.
This is just beta, the next version will have intraday data upto 10months and daily data from commencement, so you can deploy only profitable strategies. You can do all of this on a professional charting software, but where algoZ has the advantage is because it is on the trading platform the option to go live would work whereas on a charting software it cannot and all for free!!!
The below is just a very simple example, you can add so many more things to the same script to see which one was more profitable...
As given by you in the simple example, a 14 EMA crossover gives you a lot of unwanted signals. What if I want to sell on 14EMA crossover if RSI is above 60 and buy on 14EMA crossover, if RSI below 40?
How do I code it and can you also share the backtest result.?
Zerodha reply Apr 25 2013, 6:13 pm
14 EMA crossover will give a lot of buy/sell and you might get chopped when markets are flat.
RSI(Relative Strength Index) as investopedia explains is a technical momentum indicator that compare the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. In simple words, RSI ranges from 0 to 100 and typically if the value is more than 70 it is said to be overbought and if lesser than 30 oversold. So according to RSI, it is not a good time to buy if above 70 or to short if below 30.
So what Dip wants to do is, he wants to buy when 14 EMA is crossing over only if RSI is below 40, the RSI condition acts like a secondary condition to filter trades by taking on those crossovers where the contract is close to oversold, but definitely not overbought.
Similarly he wants to sell on a crossover only if RSI above 60, close to being overbought but definitely not oversold.
This additional logic is a good filter to have for someone starting off on technical analysis. The number 40 or 60, you have to decide based on backtesting.
RSI again has a time period to it which Dip has forgot to mention, but since we are looking at 14 EMA, will assume he meant a 14 candle RSI.
For the above example:
Your buy expression would be: Close>EMA(Close,14) AND RSI(Close,14)<40
Your sell expression would be : Close < EMA(Close,14) AND RSI(Close,14) > 60
Your buy exit expression: 0
Your sell exit expression: 0
Basically when you mention a 0 on the buy/sell exit expression, your exit for the buy would be your sell expression and vice versa.
So for example, if your preset order size is 1 lot, if your buy expression gives you a prompt, you buy 1 lot and when the sell expression comes, you sell the 1 lot you are holding and take a fresh selling 1 lot.
You can follow the steps in this blog to save this expression, backtest and take live.
Backtest result for the last 22 days intraday on 1 min candles:
1st trade Short at 5610 , buy at 5509 profit of 101 points.
2nd trade Short at 5629, if you had put a 50 point SL, loss of 50 points.
Net profit of around 50 points, but do note that strategies like these which work on moving averages can be choppy in flat markets.
