Top 3 Tips To Improve Your Trading Algorithm

Top 3 Tips To Improve Your Trading Algorithm
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What is going on everyone this is Jacob Amaral here, today we're going to be talking about 3 quick tips on how to improve your automated trading algorithms.


Say you have some trading algorithms running and they're performing okay but you want to know if they can do better either reduce your risk or potentially increase your returns.


I think these three quick tips will help you on doing that.


Multiple Exits

Tip number one is multiple exits, so generally when you have a trading system you exit your full position size on your exit parameter your exit parameter could be a profit target could be a stop loss a trail stop that sort of stuff so usually you exit 100% of your position try multiple exits, try exiting 50% of your position or 33% of your position and let the rest ride for another exit signal generally you'll see in real time and in your back test your sharp ratio and your risk overall is going to be reduced because you're shaving off your profits so for example say you have a trading system that has a two percent profit target and one percent stop loss the stop loss will always exit 100 of the position but the profit target set maybe a fifty percent exit where you sell fifty percent of your position say fifty shares if you're in a hundred at two percent and then hold the remaining fifty shares for four percent so you you'd exit 50 shares at two percent profit target and then exit 50 shares at four percent profit target and try running that with your back test you'll see that your sharp ratio your Sortino ratio and your overall risk will be reduced because you're shaving off your profits and you know you know collecting some of your your profits quicker and then letting the rest run now sometimes this doesn't always work sometimes you sell 50 of your position and then that asset goes in the other direction and your stop hits and and you know sometimes exiting your full position would have done better but that's all with with back testing but that's tip number one is multiple exits.

Longer Timeframes

Tip number two is using longer time frames personally I don't find any success with minute you know five minute 10 minute candle sizes with any of my systems they just they trade too much there's too much noise. Try looking at 60 minute 120 minute daily weekly candle sizes that sort of stuff you will find that generally you'll have a higher win rate because it just takes longer for a an asset to come to fruition um it just takes longer for that to happen there's a lot of noise with one five-minute 10-minute candles I'm not saying that you can find profitable strategies with those I'm sure many do but personally try using longer time frames um and with your strategy rewriting with a back test and and see how it performs because i think on average longer time frames you will do better so tip number two is use longer time frames than minute.


Trail Stop On Exit Signal

Tip number three is to try a trail stop on exit, I think this is a very unique exit parameter usually when you usually with trail stops with your brokerage you know as soon as you enter position you set a trail stop. Say you said a 1% trail stop and if the asset keeps going up your trail moves up so you kind of lock in your profits but instead try having a different exit parameter and only activate the trail stop when you hit that exit parameter so for example say you enter a position and your exit parameter is um you know when the and say your exit parameter is when the simple moving average crosses above the close so when it crosses above the close you exit instead of selling your position then then set your trail stop to one percent and that way if the asset still keeps going in your direction you're going to have a bigger win and and that way you don't set the trail stop away you don't get stopped out immediately because of a bunch of noise instead you have an exit parameter and then you you activate the trail stop order when that exit hits and generally you'll see some bigger returns with that being said you know there's none of this is guaranteed and sometimes you'll set your trail stop and um you know it'll just go the other direction and you would actually make more profit if you exit but this is something to try and see if it improves your algorithms and i think these three tips overall at least one of them will help some of your strategies there's no guarantee that they're gonna help your strategies but they're different perspectives different ideas to think about um and and to try and to you know test at the end of the day so anyways that was three quick tips on how to improve your algorithms let me know in the comments below if you're going to use any of these or if they helped improve your algorithms I would love to hear what you guys have to say so anyways we will see you next time and have a good one guys!