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
- Define exact rules
- Code the logic
- Backtest thoroughly
- 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
- Good algo takes months
- Most fail initially
- Paper testing essential
- Start simple