Automated trading: Probably FX’s least understood concept

FXCM’s quantitative strategist explains his City A.M. Active Trader discussion

FX TRADING is a relative newcomer to financial markets, but there are a great many reasons why traders are drawn to currency trading. Automated trading, however, is an even newer concept, and has historically been limited to only the most sophisticated professional speculators. The idea seems esoteric, but the attraction is obvious: wouldn’t it be wonderful to dedicate trading capital to a system that automatically produces “alpha”?

The “whys” on automated FX trading are therefore fairly straightforward. Unfortunately, the “hows” are probably the least understood concepts in forex trading.

I realise I may harm attendance at my event at City A.M.’s Active Trader Conference by saying this, but it needs to be reiterated: if the perfect automated trading strategy existed, I wouldn’t have or even need a job, as I’d keep it to myself. But the beauty of automated FX trading is that you don’t need the perfect system; you just need good strategies and knowledge of how and when to use them. That has been the major focus of my work for quite some time, and that’s exactly what I will discuss at Active Trader.

What constitutes a good trading strategy? It won’t surprise you that there’s no straightforward answer. But one of the beauties of automated trading is that we can make hypotheses and test them fairly easily – placing as much importance on the process of developing a system as putting it to use.

And that’s what’s drawn me to automation: if I can backtest/paper-test/live-test a strategy, I can understand its strengths and weaknesses. Measuring performance and effectiveness becomes that bit more straightforward if we can simply load it onto a spreadsheet and see where our system went wrong.

So this is what I’ll be discussing at Active Trader. I’ll mention the “whys” (very briefly) of automation, but more importantly will suggest the “hows”, based on my own trading techniques. And it won’t simply be a theoretical exercise – I’ll show you results of real trading strategies, and we can discuss ways I use to analyse different systems. And since I can’t run a presentation about trading without having real skin in the game, I’ll show you the systems I use most frequently in my own trading and analysis. I look forward to the event and I hope to see you there.

David Rodriguez is quantitative strategist for He will be speaking at this year’s City A.M. Active Trader conference on 21 June 2013 at the Grange Hotel, Tower Bridge, London E1 8GP. Tickets are available for only £55 at