1. Basics of Algorithmic Trading: Concepts and Examples
Commodity Trading School & RCM Alternatives

2. Commodity Trading School is a registered DBA of
Paul Brittain
Commodity Trading School is a registered DBA of
RCM Alternatives
Las Vegas

3. Past performance is not necessarily indicative of future results.
There is a substantial risk of loss in trading futures, options and commodity trading systems they are not suitable for all investors. there are no guarantees of profit. you should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. you may lose all or more than your initial investment
Past performance is not necessarily indicative of future results.
Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. .

4. Paul Brittain 30 year industry veteran. Branch Manager
RCM Alternatives
Regular Contributor to Various Industry Publications.
Profiled in Trader Monthly (June 2005).
Author of Commodity Options
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

5. What are Algorythm’s?
An algorithm is a specific set of clearly defined instructions aimed to carry out a task or process

6. Algorithmic trading (automated trading, black-box trading, or simply algo-trading) is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader. The defined sets of rules are based on timing, price, quantity or any mathematical model. Apart from profit opportunities for the trader, algo-trading makes markets more liquid and makes trading more systematic by ruling out emotional human impacts on trading activities.
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

7. A Simple Example Suppose a trader follows these simple trade criteria:
Buy 2 contracts of the Emini S&P when its 10-day moving average goes above the 20-day moving average
Sell 2 contracts of the Emini S&P when its 10-day moving average goes below the 20-day moving average

8. An example using a simple 10-20 moving average crossover

9. Using this set of two simple instructions, it is easy to write a computer program which will automatically monitor the selected market’s price (and the moving average indicators) and place the buy and sell orders when the defined conditions are met. The trader no longer needs to keep a watch for live prices and charts, or put in the orders manually. The algorithmic trading system automatically does it for him, by identifying the trading opportunity.
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

10. Algo-trading provides the following pros & Cons:
Trades can be executed at the best possible prices (always possibility of slippage). Instant and accurate trade order placement (thereby high chances of execution at desired levels)Trades timed correctly and instantly, to avoid significant price changes. Reduced transaction costs 
Automated checks on multiple market conditions. Reduced risk of manual errors in placing the trades Cons
Trading systems do have some characteristics which some investors may find unappealing. Chief among these are trading systems tendency to be more volatile than their managed futures program brethren, although often less volatile than trading futures on one’s own. Because trading systems have nobody actively managing them, they can have larger swings up and down, and can stay “out of phase” longer causing larger draw downs. Finally, trading systems have been plagued in the past by often unrealistic hypothetical results. This is usually a result of an overzealous system developer who may have curve fit the program to show an equity curve which goes straight up, or the result of an unscrupulous broker showing results without the inclusion of commissions, slippage (the difference between where the trading system signals a buy/sell, and where the client actually gets filled because the market is moving at the time of the signal).
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

11. Algo-trading is used in many forms of trading and investment activities, including:
Mid to long term investors or buy side firms (pension funds, mutual funds, insurance companies) who purchase stocks in large quantities but do not want to influence stocks prices with, large-volume investments.
Short term traders and sell side participants (market makers, speculators, and arbitrageurs) benefit from automated trade execution; in addition, algo-trading aids in creating sufficient liquidity for sellers in the market.
Systematic traders (trend followers, pairs traders, hedge funds, etc.) find it much more efficient to program their trading rules and let the program trade automatically.
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

12. Algorithmic trading can provide a more systematic approach to active trading than methods based on a human trader's intuition or instinct.
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

13. Algorithmic Trading Strategies
Any strategy for algorithmic trading requires an identified opportunity which can be profitable in terms of improved earnings or cost reduction. The following are common trading strategies used in algo-trading:
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

14. Trend Following Strategies:
The most common algorithmic trading strategies follow trends in moving averages, channel breakouts, price level movements and related technical indicators. These are some of the easiest and simplest strategies to implement through algorithmic trading because these strategies do not involve making any predictions or price forecasts. Trades are initiated based on the occurrence of desirable trends, which can be easy and straightforward to implement through algorithms without getting into the complexity of predictive analysis. The above mentioned example of 10 and 20 day (slide 8) moving average is a popular trend following strategy. 
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

15. Algorithmic Trading Strategies
Trend Following Strategies Arbitrage Opportunities
Mathematical Model Based Strategies
Trading Range (Mean Reversion)
Volume Weighted Average Price
Time Weighted Average Price
Percentage of Volume
Implementation Shortfall
To mention a few…there are many many more

16. Technical Requirements for Algorithmic Trading
Implementing the algorithm using a computer program is the last part, clubbed with backtesting. The challenge is to transform the identified strategy into an integrated computerized process that has access to a trading account for placing orders. The following are needed:
Computer programming knowledge to program the required trading strategy, hired programmers or pre-made trading software
Network connectivity and access to trading platforms for placing the orders
Access to market data feeds that will be monitored by the algorithm for opportunities to place orders
The ability and infrastructure to backtest the system once built, before it goes live on real markets
Available historical data for backtesting, depending upon the complexity of rules implemented in algorithm

17. The bottom line is that there are many algorithm based trading strategies available The Question is: Which one is right for you? That Answer is: It depends. Everyone’s tolerance for RISK is different. As are their return expectations. RCM oversees literally hundreds of Algorithm based trading “systems” and our mission is to assist you in your quest!
Let’s take a look at a handful of these
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

18. Examples of A Handful of “these”
Step 1 – Note that there is a different between “suggested capital” and “required capital”.  Suggested capital is designed to target a drawdown in the range of 33%.  Required capital is the minimum amount of capital that MUST be in the account at the start of each trading session.
Step 2 – pick a system or portfolio of systems, we have included links to my favorite ones ranging from about a $5000 minimum on up. Please note that hypothetical & live performance might be mixed when viewing these self directed systems, therefore, please read the notes & disclaimers on each page
Trading Futures, Options and Commodity Trading Systems involves a substantial risk of loss and they are not suitable for all investors. Past performance is not indicative of future results

19. A Smarter Trader is a Better Customer!
Thanks for stopping by!
A Smarter Trader is a Better Customer!
Paul Brittain
Commodity Trading School is a registered DBA of RCM Alternatives is a registered DBA of Reliance Capital Markets II LLC
Trading Futures and Options involves a substantial risk of loss and may not be suitable for all investors. Past performance is not indicative of future results.