Screening and System Trade
Even if you describe it as program trading in one word, the question of what to buy and sell remains. For a long time, the goal for many people was to create something that matches all securities with strategic trading methods, but in reality, price movements differ per security, and it seemed impossible to create such a dream program. Although Ichimoku Kinkō Hyō is said to derive direction and timing and is suitable for long-term analysis, reading the next move in a ranging market is not its strong suit, so each analysis has its own area of expertise. Therefore, screening, a method for selecting securities, exerts its power.
Extracting those conditions from a vast number of securities took a lot of time even in the computer era. The capabilities of the Internet,PC capabilities have modernized, and even with that method, it still takes considerable time in the modern era, but the advancedTradeStation Suites’sRaderScreen communicates with the server in a way that allows extraction at a speed never seen before. In reality, some programming knowledge is required, but by specifying several conditions, you can complete the extraction of the relevant securities. This makes it easy to pick which securities would best permit your own programmed trading to be powerful.
To give a simple example, when you think of screening,PER and market capitalization or total trading value come to mind immediately, but here we also add technical indicators such asRSI and volatility. If you are riding a trend, you might want larger movements, but with high volatility the fluctuations are large and there is a higher risk of being swung the other way. Therefore, historical volatility around5%,TrueRange not being extremely large,RSI (MACD works too) are within the standard deviation, or60% around overbought levels, extract securities near the points of pullbacks or retracements, and select those close to such points. Then by applying trend-following programmed trading and executing trades, you can increase the win rate. The issue is that liquidity cannot be ignored, so that should be considered as well. If you are doing range breakout counter-trend trading, specify the price movement range to extract, and set the program to enter when it reaches the configured reversal point, which should make the win rate more reliable.
This is a very obvious thing, but by having the machine do this “obvious” work, trading becomes free of emotion.
(Next time, the legendary patterns of guaranteed wins)
