- Details
- Category: FAQ
Q: What does the trading algorithm trade in?
A: It trades the Micro ES E-Mini S&P 500 futures and ES E-Mini S&P 500 futures. These futures have the same price, but differ in multiplier and margin requirement.
Q: How much money do I need to trade these futures?
Trading futures is a little different from trading stocks. For trading futures, you need to have a certain minimum amount of cash in your account; this is called the margin requirement. And instead of cash, a portfolio of other assets may also serve as a margin. The margin requirement for futures may be different for each broker. For Interactive Brokers, you can find it here. At the moment of writing, the margin requirement for one MES is $ 1173,- and for the bigger ES it's exactly 10 times as high as this future is 10 times as big as the MES. Over time, margin requirements may change whenever brokers decide to do so.
Q: When will there be trading?
A: Every Monday to Friday between 0:00 and 22:00 CET. But depending on the strategy setting, the trades will likely be more clustered around certain moments in the trading day. Check the trading journal to get an impression. At the end of the session, any open position is always closed (automatically), so it's a proper day trading strategy.
Q: Is there really no more human intervention at all?
A: True, there is a constant stream of data coming from the exchange that is continuously analyzed. If the outcome of that analysis is: open a position, whether long or short, it will be executed by the algorithm without asking for human confirmation or intervention. The same applies to closing a position.
Q: How is an open position monitored?
A: Immediately upon opening the position, a linked bracket order is sent. These are two additional orders, which, on the one hand, limit the maximum loss (stop loss) and, on the other hand, take profit at a certain price level (profit target). The algorithm may decide to adjust any of those two orders over time. There's one restriction: after opening the position, the initial stop loss is never set wider than its initial setting. So at the open, the maximum loss on any particular trade is known in advance.
Q: Sometimes during the session, the position is also closed without hitting a bracket order. What happens there?
A: At the well-known moments when important macroeconomic announcements are made or figures are released, the algorithm is extra alert to certain market behavior. If just before that moment other market participants withdraw their orders, and liquidity dries up, then a sudden large order can give the price a huge push, possibly skipping whole chunks of the price. Even a stop loss can then be skipped, whereby the position will close at a much worse price than what the stop loss was set at. If the described behavior is observed, then to avoid the risk of a very 'bad stop loss', the position will be closed. This, too, is all done without human intervention, of course.
Q: Does the algorithm then know what news is coming out?
A: No, it only studies the behavior of other market participants and tries to avoid (too) much risk. If other market participants get nervous and withdraw orders, the safest move is to quickly close the position yourself.
Q: How can I receive the signals?
A: Here is the info you need.