Technical trading systems are a favorite discussion topic amongst
technical traders who use indicator based programs to backtest data
using various indicator combinations to create canned or black box
solutions. This approach is also utilized within the institutional
ranks and is growing in importance in the United States and European
financial districts. In fact, algorithmic trading is replacing manned
trading desks as companies seek to employ Ph D types to create high
frequency trading strategies that exploit short term market inefficiencies
and anomalies. Complex mathematical and proprietary formulas are often
used in this approach and firms such as Renaissance Technologies go
to great lengths to protect their strategies.
There are many different software packages used for the design
of mechanical trading systems. Popular software includes Metastock
and Wealthlab. These companies offer off the shelf solutions with
pre-programmed indicators and interfaces that provide the versatility
to code custom indicators. There are many programmed Metastock trading
systems available on the internet and circulating within the Metastock
community. This software is heavily utilized within the retail community.
Institutions often build their own software from the ground up.
Hedge funds and financial institutions employ the services of programmers
to create custom packages that interface with clearing firms. These
specialized packages need to be robust enough to handle high frequency
trading applications.
The Wealthlab (www.wealth-lab.com) site has many trend trading
systems and stock trading systems that have been developed by individuals
who share their work. The software has a built in download manager
that permits owners of the software to update via the internet on
a regular basis. This software is freely available to individuals
in the US who satisfy Fidelity Account requirements. Traders outside
the US can purchase the product separately. This site also has a
free account setup facility that permits monitoring a portfolio
and using chartscripts for analysis purposes.
There are many books written for technical trading system enthusiasts.
Traders Press (www.traderspress.com) and Amazon (www.amazon.com)
is a great place to prospect for publications that can be used for
strategy formulation and generating trading system ideas. This includes
books on software platforms such as Trade Station which uses the
Easy Language proprietary language for development.
There are also dedicated sites that sell or rent technical trading
systems. You can visit The Collective (www.collective2.com) and
Rockwell Trading (www.rockwelltrading.com) to learn more.
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