Algorithmic trading accounts for about 20% of institutional Forex volumes. Until recently, fast and efficient algo bots were too expensive to make sense for most retail traders. That’s just changed thanks to the rise of point-and-click algo builders like Silicon Signals.
The Challenges of Manual Trading
In traditional, manual trading, a trader will formulate a strategy and back-test it with past data. If the strategy seems to work, the trader will open and close trades when real-life conditions meet the strategy’s criteria. This approach has 2 fundamental problems:
1) Emotional trading. Traders often find it hard to stick to their strategy when emotions run high, especially when it looks like they are about to lose money.
2) Lack of time. Traders are people too! They need to sleep, to eat and spend time with their families. But a jack of all trades is master of none. Well-meaning manual traders inevitably miss out on trading opportunities.
The Algorithmic Solution
Algorithmic trading (algo trading) means using a computer program to execute a strategy. The trader formulates a strategy and a programmer transforms it into code, usually using languages like Python or R. The result is called a bot. It will execute trades automatically whenever the conditions fit the strategy. Bots have 3 big advantages over humans.
1) Efficiency: a bot never misses an opportunity and can execute thousands of trades a day.
2) Speed & accuracy: a bot executes instantly, almost without slippage.
3) No emotion: a bot isn’t prone to panic, greed, or excitement.
If a strategy itself is valid, a bot should yield a higher profit than manual trading. As a result, around 20% of all Forex institutional volumes are generated by bots and over 60% of the volume in equity trading. So why are retail traders missing out and not using the same tools as their institutional peers?
Cost is the main barrier. A programmer may not charge much for an initial algorithm, but every successive change will cost extra. Since a bot has to be updated as often as market conditions shift, expenses tend to pile up over time. Most retail traders’ volumes are simply too small to justify the expense.
Are Forex Signals a Viable Alternative to Algo Bots?
In place of algo trading,many retail traders subscribe to so-called Forex signals. These are buy& sell alerts supplied by professional traders and usually come from the professional trader’s own algo bots. Most signal subscriptions cost from $30 to $100 a month.
Signals can be useful if you don’t want to formulate your own strategy, but they aren’t a replacement for algorithms. You still have to execute your trades manually and pay a fixed fee regardless of whether you earn a profit or not.
Creating Your Own Algorithms with Silicon Signals In 7 Steps
The optimal solution for retail traders is to be able to build algo bots and create Forex signals without writing any code. Silicon Signals is one of the first companies on the market to let you do just that. Its point-and-click algorithm builder is easy to master even for beginning traders with zero knowledge of programming. The algo builder is free for a limited time only.
Designing a free trading algorithm with Silicon Signals involves 7 simple steps:
1) Define a strategy. The website has a collection of how-tos for various strategies.
2) Select the conditions in the Silicon Signals editor. You can choose among 10 Forex trading indicators, such as MACD and RSI. For example: ‘When EUR/USD 14-day SMA crosses from above to below the EUR/USD 28-day SMA’.
3) Set up the actions. Here you select which action the bot will take when the conditions are met: buy or sell an asset.
4) Money management. You need to decide the trading amount and set the Stop Loss (SL) and Take Profit (TP) values, as well as the number of times that the SL or TP can be activated before the strategy stops running.
5) Test. The trader can back-test the strategy using past market data and/or paper-test it on current data without investing real money in it.
6) Download the Expert Advisor. This is a file that needs to be copied into the data folder of the MT4 or MT5 trading platform.
7) Activate the algorithm in the trading terminal.
How Much Can You Rely On Bots?
Once activated, a Silicon Signals algo bot starts to generate MT4 signals and execute trades in accordance with your strategy.
A do-it yourself bot has all the advantages of a bot that has been coded by a professional programmer. It’s fast, precise, and can save the user hours every day. Best of all, the system is completely free, at least for the time being.
One difference: Silicon Signals allows users to employ up to 10 technical indicators, while MT4 supports dozens. That said, Silicon Signals menu of technical indicators includes the most important trend, momentum and volume indicators. That’s plenty for the retail trader.
How much supervision a bot needs is a different matter. No strategy can keep delivering good results forever without adjustments. While your bot may remain relevant as long as the market trend lasts, you’ll need to refine the values from time to time. With Silicon Signals, that takes just minutes. Plus, the system includes a handy equity graph that shows you when and how you made or lost money.
All the while, you’ll need to be watching price action to catch any trend reversal. Any significant change usually requires switching to a different strategy, so you’ll want to be ready with some draft strategies. Luckily, building a new algorithm in Silicon Signals takes significantly less time than ordering one from a programmer.
Algo trading can deliver significantly higher returns than manual trading, but it’s only as good as the underlying strategy.. Silicon Signals frees traders up to devise a winning strategy. Traders can finally build algorithmic bots quickly, without writing a single line of code, and do itfor free. Such bots are easy to integrate into the most popular terminals, MT4 and MT5.
The key to success is to continuously study price action, monitor the market and refine the algorithm when needed. Silicon Signals can do most of the ‘heavy lifting’ for the trader, but the most important task – designing a strategy – remains up to you.
Silicon Signals is currently free to use. For more information, visit the official website.