How a Reliable Algorithmic Trading System Can Boost New Trader Success

“Take calculated risks.  That is very different from being rash.”

– General George S. Patton Jr.

One of the main reasons why so many new and discretionary traders lose money is that they have no idea what they are doing. 

They might have watched a few “trading tutorials” on YouTube or – worse – bought a shady online day trading course for a lot of money, and then decided to open a broker account.

Many online traders also spend a lot of their time looking for a method to trade, or are constantly changing their methods, or play around with messy spreadsheets.

This approach is a recipe for disaster.

Enter the Algorithmic Trading System

A systematic and/or algorithmic (“quant”) approach to trading is very different from a discretionary one. 

Using an algorithmic trading system, you can’t just open a broker account and immediately start trading. 

You first have to choose your market, understand its structure, design your system, backtest it, analyze it, and adjust it before you actually start risking any significant amount of money trading it.  

That research hurdle (which we find very fun by the way) is a real advantage to stop you from losing money.

Here at PairTrade Finder® we have spent a great amount of time developing a successful trading strategy and system. We are experienced traders and computer programmers that work full-time on delivering products and services to online traders.

What are the Key Advantages of Using an Algorithmic Trading System?*

1. Backtested and Optimised on Market History, a System Provides a Mathematical “Edge”:
   
   • Through backtesting and system design, you are acting like a casino owner, not its patrons, or more like an insurance underwriter.  You seek to succeed from many small profitable trades and occasional losses
     
2. Algorithmic Trading System Rules Avoid Human Emotion Influencing Your Trading:
   
   • Traders often lose money due to emotional decisions and the stress of losing trades
     
3. Improved Risk Management:
   
   • Disciplined position sizing based on account equity can prevent a series of large losses and the risk of ruin, of which many traders are unaware or insufficiently aware
     
4. Provides Certainty, Develops Confidence and PRODUCES LESS STRESS:
   
   • “Investing [and trading] should be more like watching paint dry or grass grow.  If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
     
5. Scalability:
   
   • Algorithmic systems can handle a large number of trades across different markets and assets simultaneously, something that would be unmanageable for a human trader.

What Are the Potential Weaknesses of an Algorithmic Trading System?

Like with all trading tools and approaches, there are also some weaknesses to the approach which must be mitigated:

1. Technical Failures:
   
   • Algorithmic trading systems rely on technology, and technical issues such as server downtime, connectivity problems, or software bugs can lead to missed trades or financial losses. We are constantly striving to make our platform as seamless, robust and efficient as possible
     
2. Lack of Flexibility:
   
   • Algorithms operate strictly according to their programming and cannot adapt to unexpected market conditions or news events in the way a human trader might. Out-of-sample testing and paper trading are used to develop confidence in the robustness of the system
     
3. High Development and Maintenance Costs:
   
   • Creating and maintaining an effective algorithmic trading system requires significant investment in terms of time, money, and technical expertise. That’s why you have PairTrade Finder® to do it all for you!
     
4. Over-Optimization Risk:
   
   • There is a risk of overfitting the algorithm to historical data, which can lead to poor performance in live trading conditions as the algorithm may not generalize well to new data. We address this risk in detail in our Video Training Course How to Successfully Pair Trade Stocks which all new free triallers get to join for free

A further good discussion on algorithmic trading systems and their applications is available on QuantMatter here.

How We Think Our Software Can Help You

The broad market is full of ups and downs that force out weak players and confound even the smartest prognosticators. However, the beauty of the pairs trade is its simplicity. The long/short relationship of two correlated and cointegrated securities acts as a ballast for a portfolio caught in the choppy waters of the overall market. The hedged nature helps protect you from market crashes and large account drawdowns.  

What’s more, pairs trading has the potential to achieve profits through simple and relatively low-risk positions in all market conditions.  Add to this fact that the natural hedging provided by the system allows a trader to safely deploy leverage to increase these potential profits, and you can see why this hedge fund strategy has been a favourite for over 50 years.

Take the Next Step to Consistently Profitable Trading

By subscribing to PairTrade Finder® Ultimate Alpha 3.0, our latest algorithmic trading system and software, and using it to develop your own custom pair trading system, we believe you are significantly increasing your chances of achieving trading success.

“I am amazed that more people are not using your software…have managed to make $8000 in the last 3 weeks. I credit that to you, your staff, the great videos and the excellent software...love your product and I intend on being a lifelong user…Truly grateful.”

– C. Stone

Think of us as your partner in your long-term wealth creation strategy. We are not a fly-by-night company.  We have been around for a long time (2008) and we will continue to provide the best service to our clients well into the future.

“Just to say how delighted I am with your product. For the first time in 10 years I am consistently profitable. If I can sort out my discipline and stick with the signals the results would be even better. Yours eternally grateful.”

– L. Koziol

With PairTrade Finder® you can receive entry and exit signals for pair trading opportunities delivered directly through just about any mode of communication of which you can think.

Whether you are at work, on the golf course, or on vacation you can receive and act on PTF’s signals.

Additionally, Ultimate Alpha 3.0 now has a full autotrading capability into Interactive Brokers’ Trader Workstation®. Use it to automatically trade your system, and just check it once a day to ensure it is behaving itself! You can watch a video of it in action here.

So to Sum Up…

PTF is designed to allow you to use advanced technology and years of professional traders’ experience to quickly, easily and conveniently harness the alpha potential of the long/short trading strategy.

Additionally, by using PTF with our pre-loaded Top 50 USA Stock Pair Stars to call trade signals, you take advantage of years of system and software design, hundreds of hours of backtesting and a process of rigorous filtering to find pairs designed to deliver you a strong trading edge.

We think this is a serious value-add to any trader, retail or professional.

Start a free trial here.

To Financial Domination,

Geoff, Paul & the PairTrade Finder® Team

* Paraphrased from Charles D. Kirkpatrick II and Julie R. Dahlquist’s Technical Analysis: The Complete Resource for Financial Market Technicians, 3rd Edition 2016.