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What you need to know about algo trading in the futures markets
Here is what you must know about Futures Trading Systems
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Often referred to as algorithmic trading systems, or simply algos, an automated futures trading system is a defined set of technical rules and parameters that ultimately determine entry and exit points for a given contract. In the event that all of the stipulated technical events occur, a buy or sell signal is created and a trade is automatically executed without human intervention. Simply put, it is trading on autopilot.
Each system is comprised of specific ingredients and circumstances, but they most commonly involve moving averages, stochastics and other computer-generated oscillators. However, along with technical indicators many of “the computers”, as they call them, are trained to scour the news headlines for key words which are then incorporated into the “buy” or “sell” triggers.
As you can imagine, the results are highly dependent on how well the rules perform in various market conditions. Accordingly, system developers spend an incredible amount of time optimizing the system to manage risk and increase the odds of profitable results in any environment. With that said, market conditions are always changing, so finding a system that works in yesterday’s markets according to back-testing, doesn’t guarantee they will work in today’s markets. As is the case with any trading venture, there are never any guarantees.
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