Algorithmic Trading Basics

Algorithmic trading removes emotion and executes with precision.

What is Algo Trading?

• Automated trade execution
• Computer follows programmed rules
• No human emotion

Types of Algos

• Fully Automated
• Semi-Automated (alerts only)
• High Frequency (not for retail)

Benefits

• Emotional removal
• Speed and precision
• Backtesting capability
• 24/7 operation

Getting Started

Languages

• Python (most popular)
• MQL4/MQL5 (MetaTrader)
• Pine Script (TradingView)

Steps

1. Define exact rules
2. Code the logic
3. Backtest thoroughly
4. Forward test 3+ months

Common Strategies

• Trend Following (MA crossovers)
• Mean Reversion (RSI extremes)
• Breakout (channel breaks)

Pitfalls

• Curve fitting to past data
• Neglecting after launch
• Expecting magic solution

Reality

1. Good algo takes months
2. Most fail initially
3. Paper testing essential
4. Start simple