Did you know that around 92% of the trades in the global forex market come from automated algorithms? Yes, the price movements in the largest and most liquid financial market in the world are primarily the result of automated trading strategies.
Automated trading or algorithmic trading first started gaining popularity in the early 2000s and has now become super popular. A custom trading system is a way to automate your trading activity based on your desired or customized conditions and rules.
Custom trading systems are quickly becoming the primary way in which retail traders, mutual funds, and financial institutions conduct their trading activity.
Here is everything you need to know to get started.
Custom Trading System – What is it?
A custom trading system is essentially an algorithm. You can program the algorithm to enable it to trade precisely in the way that you want. For example, if you want to purchase stocks when their moving average rises to a certain number when they exceed a certain volume, you can just provide the instructions to the algorithm and it will do it for you.
This customized system can be as simple or as complex as you need it to be. You can instruct the algorithm to trade based on 20 technical indicators and factors, or you can ask it to trade based on 4 indicators.
As the name suggests, a custom trading system can be completely modified. It can also be reprogrammed as many times as you want. You can keep making changes to it until you’re completely satisfied with the result.
Should You Buy or Build a Custom Trading System?
There are several factors that you should consider before making this decision. It depends entirely on your goal, experience, and resources. Buying a custom trading system can provide a good way for you to start algorithmic trading.
If you are unsure about the parameters that you should use to build a custom trading system, then it may be a better idea to buy a tried and tested custom trading system.
However, if you’re experienced in trading and need a custom trading system that does exactly what you need it to do, then building a custom trading system is the better option.
Building your own custom trading system can be more time-consuming and heavy-on-the pockets. However, the rewards of building one from scratch can be significant. If you have the required vision and a trading strategy honed from years of experience, then building such a system makes more sense.
Who Should Opt for a Custom Trading System?
Custom trading systems are a good idea regardless of whether you’re a retail trader or an institutional trader. With advances in technology, building a custom trading system is now accessible to everyone. There are several platforms out there that will provide the tools that you need in order to build your own custom trading system.
It is important to note that the success of a custom trading system depends entirely on the instructions that you give it. Hence, if you’re a new trader or don’t have the necessary knowledge or experience, then having a custom trading system may be too early for you.
Instead, you should focus on building your manual trading skills, until you have the required know-how of building your own automated system.
You do not need to have advanced programming skills in order to make a custom trading system, however, you do need a sophisticated knowledge and understanding of trading securities.
Pros and Cons of Custom Trading Systems
We’ll discuss the cons first, to get them out of the way.
A custom trading system is not a set-it-and-forget-it system. Developing a custom trading system takes time, and there is a learning curve. You should start with small order sizes while you refine the system until it is satisfactory.
Further, even once you have the right strategy, you will still need to monitor the software. This is because an algorithm may develop faults and errors that need to be rectified. You may lose your Internet connection or some other technical issue may cause the algorithm to malfunction or be rendered inoperative.
Now for the pros.
A custom trading system allows you to keep your emotions out of the way. Algorithms trade exactly the way that they are programmed to, regardless of how humans feel. A custom trading system is also much faster than humans. It can execute trades in a fraction of the time that it would take a human trader to react.
Further, once you have a successful custom trading system in place, 90% of your work is done. You can sit back and distantly monitor the system while the system does the work for you.
What Do You Need to Get Started?
You just need two things to get started and build the custom trading system of your dreams.
You will need a trading strategy that works for you and can be programmed into a custom trading system. You will need to provide the “rules” based on which the trading system will operate. Hence, if you’re a new trader, then you will need to spend some time in order to develop your strategies to a level where it can be automated.
You do not need a perfect strategy. That does not exist. However, you do need enough to make a start. You need to program the stop-loss triggers, the buy triggers, the sell triggers, the degree of volume, and so on.
Next, you will need an algorithmic trading platform. This service provider will provide the software on which you can build your custom trading system. Usually, the software will come with its own “wizard” in which you can enter the numbers and figures that you want the algorithm to operate with.
However, if you want greater flexibility and customization, then you will need to work with the developers to develop your own software. This method can be more time-consuming, but the rewards can be high.
Which Platforms Support Custom Trading Systems?
There are numerous platforms available in India that provide custom trading systems. Each of these platforms has its own pros and cons. Hence, you need to do your own research to figure out which platform suits your needs the most.
Here are some of the most prominent examples:
1. PHI 1: PHI 1 is an all-in-one tool that can take care of all your custom trading system needs. This tool aims to balance flexibility with ease of use. You only need a basic understanding of the Python programming language in order to use this tool and it provides more than 120 technical indicators built into the system. PHI 1 will also create a system for you. More on this later….
2. MetaTrader 5: MetaTrader 5 is one of the most widely used tools for trading. It also offers certain algorithmic trading features. You can use a specialized development environment called MQL5 IDE to develop your system.
3. Ninja Trader: Ninja Trader is primarily a brokerage service that has its own trading platform. The trading platform caters to both manual trading and automated trading activity. The automated trader comprises the SuperDOM tool which allows you to customize your trading.
What kind of Pricing can I expect for a custom trading system?
The pricing can vary significantly depending on the platform that you use.
Some automated trading platforms offer a subscription-based service. You pay a fixed monthly sum in order to use the platform.
Other automated trading service providers, such as PHI 1 also provide a custom quote based on certain factors. These factors include the number of hours required to build the custom trading system (PHI 1 will build the system for you, so you don’t have to worry about the programming), the maintenance cost of the system, and the server cost.
Challenges with Custom Trading Systems
The biggest challenge that you will face while building a custom trading system is which technical indicators and tools to use. It is not easy to automate trading activity in such a way that it does not require human input. It will take time and effort to build such a system, however, it will be worth it.
Depending on the service provider that you choose, you may also need to hire a programmer or developer to take care of the coding for you. Some custom trading systems do not require any prior coding knowledge, but these systems offer very little flexibility and customization.
How PHI 1 Helps Build Your Custom Trading System?
PHI 1 has been built from the ground up keeping your algorithmic trading needs in mind. The custom trading software that PHI 1 offers is completely customizable, and PHI 1 works with you in order to develop it in exactly the way that you need it to be.
If you’re looking to purchase a trading system, then PHI 1 offers three pre-built systems that you can choose from. These are:
1. A tick-by-tick system
2. A pine script strategy for signal generation + custom reporting
3. A combined tick and candle-based tool with technical indicators.
PHI 1 offers ad-hoc and pre-packaged services that can help you build a system that can take your trading a notch higher.