Building Automated Trading Strategies October 2018 | Page 21

4. What is the trading cost (fees, spread, overnight cost)?
5. Are there any hidden risks involved (liquidity risks, correlations with
other assets, etc.)?
6. How much to trade (position sizing)?
7. What trading orders should be used (market orders, pending orders,
stops)?
8. When or where to sell (target-price, price intervals, etc.)?
The Basic Automated Trading Strategies
Designing a successful trading strategy involves beating the market’s future
price expectations either by more knowledgeable or faster processing of the
available information 5 . There are tens of different automated trading
strategies. You can even combine two or more strategies to build a multi-
trading system.
(1) Trend-Following Strategies
This is the most popular automated trading strategy. A trend-following
strategy uses historical data to evaluate and follow strong price trends using:
i.
5
Historical Support & Resistance
“Automated Trading with Machine Learning on Big Data” Dymitr Ruta (2014)
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