Under Automated Trading, we benefit from superior execution and pricing along with our overall Strategies, thus enabling a strategy to fit around our requirements. Trades are executed automatically. With this, we can then set up the rules desired for the Automated Trading system to follow. These are based on standard variables like Price and Volume or Technical Indicators like Moving Averages or Bollinger Bands or others.
Bollinger Bands are a popular technical Indicator used by us. There are several uses for Bollinger Bands. These include determining ‘overbought’ and ‘oversold’ levels, as a Trend Following Tool, and monitoring for breakouts.
Bollinger bands are composed of three lines. One of the more basic calculations of Bollinger Bands uses a 20-day simple moving average (SMA) for the middle Band. The upper Band is calculated by taking the middle Band and adding twice the daily standard deviation to that amount. The lower Band is calculated by taking the middle band minus two times the daily standard deviation.
A Day-Trader is a Speculator in Securities, explicitly buying and selling Financial Instruments within the same trading day, such that Positions are Closed before the Market closes for the Trading day.
Traders who Trade in this capacity with the motive of Profit are therefore Speculators, in contrast with the long-term trades underlying buy and hold and value investing strategies. Day-Traders normally exit Positions before the Market close to avoid unmanageable risks - negative Price gaps between one day’s close and the next day’s price at the open.
Rarely, a Trade may over-run the close of the business day, but ordinarily, Trades are Closed before the Trading day ends.
Force Open enables the Trader to maintain his exposure to a Market while Opening a New Position in the same Market, which can be a useful tool for hedging.
Without the Force Open function, most platforms will net off the Trader’s Positions. In a netted off Trade, automatically a current Position is Closed if the new Position would cancel it out (unless a Stop or a limit is in place, in which case it will keep both Positions Open). Placing two Trades of the same value using the Force Open function will create a net exposure of zero – the same as having no open Positions.
We always use Force Open where and when appropriate and prudent to do so.
High-Frequency Trading (or HFT) is a form of Advanced Trading that processes high numbers of Trades very quickly using powerful computing technology. It can be used to either find the Best Price for a single large order or to find opportunities for Profit in the Market in real-time.
The algorithms behind High-Frequency Trading tend to be extremely complex, allowing the program to Trade across several Markets at once as conditions permit. However, in our case, the algorithms are not complicated, so we use HFT where and when appropriate and prudent.
Leverage is a concept that can enable the Trader to multiply his exposure to a financial Market without committing extra investment capital.
In investing, the amount needed to open and maintain a Leveraged Trade is called the Margin. Trading using Leverage is Margin Trading. Leverage is available on several financial products, including CFD’s. When Trading using Leverage, the Trading Platform will only ask us for a fraction of the total value of the Positions: the rest is effectively loaned to the speculator by them.
The Leverage offered to Professional Traders is 1:100.
Money flow Index
The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers the Price.
The MFI is calculated by accumulating positive and negative Money Flow values, then creating a Money Ratio. The Money Ratio is normalized into the MFI oscillator form.
We use this Indicator where and when appropriate.
An Oscillator is a technical analysis tool. A technical analyst bands an Oscillator between two extreme values and then builds a trend Indicator with the results.
The analysts then use the trend Indicator to discover short-term ‘Overbought’ or ‘Oversold’ conditions. When the value of the Oscillator approaches the extreme upper value, analysts interpret that information to mean that the asset is ‘Overbought’, and as it approaches the lower extreme, analysts consider the asset to be ‘Oversold’.
We use this Technical Analysis Tool where and when appropriate.
The Relative Strength Index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The indicator should not be confused with relative strength.
The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of directional price movements.
Momentum is the rate of the rise or fall in price. The RSI computes momentum as the ratio of higher closes to lower closes. Such, too, has its value in considering taking Positions in Crude Oil, so we use the RSI where and when appropriate.
Some Day-Traders use an intra-day technique known as Scalping that usually has the Trader holding a Position for a few minutes or only seconds. A Scalp in Trading is the act of opening and then Closing a Position very quickly, in the hope of Profiting from small-Price movements.
Traders who practice this tactic are referred to as Scalpers and tend to make many Scalps each day.
We use a trading practice known as Sculpting, not to be confused with scalping. Scalping is taking advantage of small price movements by opening then closing trades in seconds or at most a few minutes. Sculpting is a skill where the trade depends on price movement and could vary from seconds to hours but still termed as day-trading as trades are closed before the end of the trading day. Sculpting is much more surgical and precise and depends on proprietary procedures and the instincts of the trader. These unique methods work in any time zone, giving flexibility to trading.
Spread-Betting is a form of derivatives Trading that allows the Trader to take a position on whether he thinks a Market will rise or fall, without having to buy the underlying asset. Importantly, Spread-Betting is a Leveraged transaction which means the Trader only puts down a small deposit for much larger Market exposure.
Using Leverage means there are significant benefits and risks: the investment capital can go further, but the Trader can also lose more than its initial deposit. Spread-Betting is flexible as it is possible to take short positions as well as long Positions in all Markets.
A Trailing Stop order is a specific type of ‘Stop-Loss’ that automatically follows the Position if the Market rises, securing a Profit, but it will remain in place if the Market falls – Closing out the Position if the Market moves against the trader.
A Trailing Stop Order does not set the Stop Level at a specific price, but rather at a certain distance away from the current Market price. It would be placed below the current Market price if we are opening a ‘BUY’ Trade, and above the current Market price if we are opening a ‘SELL’ Trade.
A Trailing Stop is set at a percentage level or a certain amount of points away from the Market price – this distance is the Trailing Stop – and the Stop will move to maintain that distance from the current price.
White Noise is the mass of material affecting a Market that is not relevant to the specific Market of interest to the Trader – the Market where the Trader specialises.
White Noise can and does often act as a distraction and is counter-productive to the Trader’s objectives and goals. For this reason, we rely on our inherent ability to separate White Noise from our key decisions on Trading, thus avoiding undesirable distraction and its unwelcome consequences.