StrategyQuant

Algorithmic Trading – Why and How?

 Disclaimer
The following presentation is for educational purposes only. All symbols and
trading ideas discussed are for demonstration purposes only and are not
recommendations.

Active trading is not suitable for everyone.

Risk Warning - Trading financial instruments, including foreign exchange on

margin, carries a high level of risk and is not suitable for all investors.
The high degree of leverage can work against you as well as for you. Before
deciding to invest in financial instruments or foreign exchange you should
carefully consider your investment objectives, level of experience, and risk
appetite.
The possibility exists that you could sustain a loss of some or all of your initial
investment and therefore you should not invest money that you cannot afford
to lose.
You should be aware of all the risks associated with trading and seek advice
from an independent financial advisor if you have any doubts.
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 Trading Strategy (EA, Forex robot)

• Consists of rules when to enter and exit the

market

• Can be simple; or can consist of complex rules

like partial entries and exits, advanced money
management, etc.

• Can be traded mechanically or automatically - no

room for opinion, everything is exactly defined

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 Computers & Trading
People rely on computers for wide range of tasks, including complicated
ones like landing of airplanes or controlling a vehicle on Mars, so of course
they are used for trading too..

Two main types of trading approach:

1.Discretionary – based on traders experience, opinion, actual feeling,
etc. Trader follows a plan, but it doesn’t need to be 100% exact.

2. Automatic
1. High Frequency Trading - usually deals with best execution
2. Strategies/Systems Trading – developing and trading strategies
that have exact rules that can be programmed into a robot or
traded mechanically, but without any room for subjective
judgment

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 Automatic vs. Discretionary Trading
Both automatic and discretionary approaches are widely used, both of them are
used by individual traders, money managers and funds.

Much more money is allocated to mechanical system traders, even though their end
to end performance is roughly the same.
Performance Index for the last 20+ years

Mechanical: 488 Systems, 265 Billions Discretionary: 160 Systems, 24 Billions

Source: BarclayHedge
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 Manual Design of Trading Strategy
• Starts with trader using his experience and knowledge to pick up the
elements of the trading strategy like technical indicators, price patterns,
entry and exit order types and general strategy design.

• When the prototype is finished, strategy is tested on the historical data to

prove its profitability. The backtest often reveals that the strategy results
are not acceptable.

• So the trader has to alter it, add or change some indicators, try different
ideas, different values and then test it again.

• It is a long trial-and-error process with numerous iterations, revisions and

testing until the strategy achieves acceptable results.

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Now imagine you have a tool that does all this
manual work for you, and does it 1000x faster...

Introducing StrategyQuant

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 What is StrategyQuant
SQ is a software that can automatically design new
trading strategies using the power of genetic
programming and evolution.

It can generate new trading strategies from the

scratch, according to given entry configuration.

It is not an Optimizer, but a generator of trading

systems based on predefined rules, parameters,
indicators, price patterns, etc.

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 How it works
Let's say you want to create a new trading strategy for EURUSD. You'll
choose the EURUSD data source, choose timeframe and time range.

Define which blocks the strategy should consist of (indicators, price

data, operators, etc.).

Define what should be the parameters of resulting strategy - for

example, total Net Profit must be above $ 5000, % Drawdown must be
lower than 20%, Return/DD ratio must be above 4, it must produce at
least 300 trades.

The just hit the Start button and StrategyQuant will do the work. It will
randomly generate new trading strategies using building blocks you
selected, tests them right away and stores the ones that fit your
requirements for your review.

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 How it works - Genetic Evolution mode
• Randomly generates the initial generation

• Then simulates evolution – initial generation of strategies is

then "evolved" over successive generations using genetic
programming technology (crossover, mutation)

• As in evolution, this should result in better and better

candidates, in our case in strategies that are more
profitable, more stable, or generally better in the selected
performance criteria

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 Advantages of StrategyQuant?
• No programming or Technical Analysis knowledge
required - you don't need to specify any trading logic

• Most complex strategy design engine with four modes

– build, test, improve, optimize

• Can generate strategies for virtually any symbol or

timeframe

• You can get results quickly, there’s no steep learning

curve

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 Key Features of SQ
Four working modes: Build,
Retest, Improve, Optimize
create strategy, retest on different symbol
or timeframe, improve it by
adding/replacing its parts, optimize it
Powerful filtering capabilities
enables you to configure the properties of
your desired strategy, such as profit,
drawdown..
Support for over 40 technical
indicators and price patterns
Indicators, Price values, Candle Patterns,
Operators, Time values, predefined rules
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Robustness Tests with Monte
Carlo analysis
reduces the risk of curve-fitting to historical
data, increases strategy robustness
Build-in Walk-Forward Optimizer
and Walk-Forward Matrix
analyze reoptimization performance and
effectiveness, choose best frequency
4 Entry types, 7 Exit methods,
adaptive Stop Loss
Enter at Market, Stop, Limit, Reverse.
Adaptive SL and PT, Trailing stops..
 What To Expect?
• StrategyQuant is a tool, not a holy grail that
creates a profitable strategy by pressing a button

• Forex is already a very efficient market, finding a

profitable strategy requires time and testing, SQ
can do most of the work

• StrategyQuant can save hundreds hours of

development and come up with strategies that
trader wouldn’t think of

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 Strategy Robustness and future performance
• Curve fitting is the main issue to watch for with computer generated
strategies.

• StrategyQuant employs powerful tools to reduce the risk of curve fitting

– Out of Sample tests – tests on previously unknown data, or different symbols

and timeframes

– Robustness tests – tests of strategy response to small changes of input, history

data, missed trades, etc.

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 Strategy Robustness and future performance 2
• Successful simple OOS test doesn’t guarantee that the strategy will be robust
also in the future – if the market fundamentally changes over what was used in
our test the system can still fail.
What are the other techniques that can add confidence that the strategy is
robust?

• Robustness tests - running Monte Carlo simulation of strategy

tested with different stress conditions

• Developing the system on multiple different symbols or timeframes

– a robust idea should ideally work on multiple markets and/or
timeframe

• Walk Forward Analysis, Walk-Forward Matrix

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 Aren’t you excited about increasing the
possibility of earning more money by trading
your own strategies?

Why do traders buy StrategyQuant?

• Technology you cannot build in-house
• Saves strategy development time
• Gives trader a competitive edge
• Can be used to improve existing strategies

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 Machine designed trading systems are here!

• Build unlimited number of your own trading strategies

• Develop strategies for virtually any market or timeframe
• Generate new trading ideas!
• Reduce the time required to build new strategy from
weeks to minutes!
• Save your strategies as a MT4 EA with full source code!

Contact: Mark Fric

mfric@strategyquant.com
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