Systematic trading methods form the basis of automated trading strategies and trading systems. These take the help of mathematical methods and other technical indicators and they use to generate buy and sell signals in the financial markets. Some of the most popular systematic trading techniques have been in use before the invention of computers while some other methods are recent methods. Here we will discuss some of the most popular methods found in XFR Financial Ltd trading systems.
Moving averages Crossover
This method is based on the crossover of 2 moving averages of different lengths. It also include triple moving average crossovers and MACD i.e. moving average convergence divergence which is the difference between two exponential moving averages. Moving averages crossover is one of the most common systematic trading methods at XFR Financial Ltd and is calculated in a variety of ways like simple, exponential, weighted etc.
Here a price channel is defined by highest high and lowest low over some past number of bars. A trade signal is given when the market goes above or below the channel. The famous turtle system was also based on channel breakouts.
This is similar to channel breakouts but the difference is that instead of using the highest high and lowest low, the break out is based on volatility. Volatility is based on (ATR) which is Average True Range based on average of bar ranges, adjusted for opening gaps over some past number of bars. To determine the breakout price the ATR is added or subtracted from the current bar’s price.
This method takes this idea as the base that if the market is below a certain level than it will have difficulty to cross above a price level. Whereas, if it is above a certain level, it will have difficulty in falling below that price.
A number of books have been written on this method of price patterns in trading. Japanese candle stick is also a way of categorizing different price patterns and it links them to market behavior.
In this method of systematic trading, bands are constructed above and below the market so that the market stays within the bands. Bollinger bands are probably the best types of price envelops. Trading signals are generated if the market touches or passes through either upper or lower band.
Time of day or day of week
This is a quite common way of systematic trading methods that many XFR Financial Ltd traders use. It is done either on the time of day or the day of the week. Certain time of the day or week favors certain patterns and favor trading and the trader can benefit from trading during that time period.
Volume is one of the basic components of market data. Therefore systematic trading methods based on volume are worthy of note methods.
XFR Financial Ltd Forecasting
Market forecasting method makes the use of mathematical analysis methods to predict the market prices at a point in the future.