Automated Trading Systems for Commodity Futures
The computer does the work and you simply check up on the results from time to time. Codex Commodities offers two trading platforms that can be programmed for futures automated trading systems. You can program a trading system yourself, or you can simply choose to purchase a ready-made online trading system designed by professional trading system developers:
- NinjaTrader: Uses C# programming language. Or, you can simply "link" TradeStation software to NinjaTrader if you wish to execute TradeStation trading system orders over the lightning fast and reliable Zen-Fire network instead.
- Strategy Runner Pro: Codex suggests a mixture of a various professionally developed, automated trading systems, such as some of systems available at this link: Click HERE
Computer automated trading systems may be useful to you if you are:
- Looking for Portfolio Diversification into
futures, e-mini's, etc.
- Wanting a method of trading that uses "objective" entry and exit criteria based on parameters that have been tested on quantifiable, historical data.
- Wanting to use a mechanical trading system that provides a way to overcome the emotions of fear & greed that sometimes lead to disaster among human traders.
- Not wanting the large time commitment and equipment costs involved with having to personally monitor the markets all day long.
What is an Automated Trading System?
Automated trading systems for commodity futures are computer software programs which execute buy and sell signals based upon price, volume, or other empirical data. By analyzing real-time price data and comparing that data to pre-set pattern recognition inputs, or by running the data through mathematical algorithms, trade signals are generated and trades orders are automatically placed.
Because these trading systems are computer based, they are not prone to the human tendency to "second guess" the trading system parameters, to hesitate in executing indicated trades, or to simply signals because the trader is distracted. So, they will not stray from the trading plan.
Because computers aren't subject to fatigue or hesitation, they may offer a more disciplined approach to trading volatile markets. They can make trading decisions 24-hours per day, seven days per week. Also, because the developmental stage is where the decision-making process is defined, tested, and refined, the trading computations and orders are placed with split-second efficiency far beyond the speed of a human trader.
This defining, testing, and refining process sometimes goes on for years and in some cases even decades. Thus, hypothetical results may offer investors the ability to evaluate key performance statistics such as:
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What Are The Costs?
As with any investment, there are costs associated with participation in computer Automated Trading Systems.
- System Subscription – Paid directly to the system developer, these fees are usually in the form of quarterly subscriptions arranged directly through that system developer's website.
- Commissions – Paid to the commodity futures brokerage firm on a per transaction basis as compensation for maintaining the business resources required to run the automated trading systems.
- Other Fees – Industry-standard fees are charged per transaction to all traders. These fees are itemized on your account statements when your system executes a trade. Also, there might be a fee charged for use of the trading technology that fully automates order execution.
A Characteristic of Some Computerized Trading Programs:
One of the benefits of computerized trading is the sheer speed with which trading decisions and order execution can be made. This makes such trading systems particularly adept for day-trading use, although some position trading systems (generally meaning overnight trades) may be offered as well.
Remember that commodity futures contracts often carry no greater overall price volatility than equities. However, the leverage available in futures versus that available in equities can sometimes exaggerate the volatility many times over.
Because of that, some automated trading systems are designed to trade with extreme frequency, hoping to capture profits during a series of small price movements executed many times during a given trading session. In fact, some prefer this to avoid the risk associated with holding positions overnight. However, the frequency of such trades can potentially generate higher commission costs which must be weighed against the benefit of limited overnight risk exposure, as well as the expected profitability of the system itself.
Automated Trading Systems: VERY IMPORTANT TIPS!
Pay close attention to the minimum equity requirement of each system. The system designers themselves know the risk/reward parameters built into their system(s) and generally have stated their suggested account minimums taking into consideration the unavoidable drawdowns that are inherent in all forms of trading.
Equity permitting, investors should seriously consider the benefit of diversification gained by allocating funds across multiple automated trading systems, or at least non-correlated markets traded within the same automated trading system. Diversification, while not a guarantee of success, does spread the risk inherent in any one single trading system or program.
Automate Trading Systems are created by applying specific algorithms to historical price data during the testing phase. So, sometimes performance numbers generated are designated as "hypothetical" – such hypothetical results are accumulated by back-testing the strategies on past market data, and it is important to remember that hypothetical results have inherent limitations in that they are prepared with the benefit of hindsight and may lack the impact of true financial risk.
