It’s not algorithmic trading; it’s what I call Parametric Trading.
Parametric Trading provides tools that give the ultimate control over your trading.
Standard charting indicators, while useful, are limited and not customizable leaving the trader in the back seat of their trades. On the other hand, parametric trading is about having full control over your trade parameters, adjustments and management. Your trade execution is no longer decided for you by a generic indicator trigger. Building your own tools allows you to not only decide which indicators/analysis you’d like to apply to your chart but do so with granularity and control over *how* the indicators and analysis are applied. For trade management this becomes paramount as you can automate and control trading decisions according to your rules as the trade progresses in response to real time price action, not your theoretical analysis before the trade started.
Trading is a human skill. I believe a bot trading a strategy cannot be sustainably successful. Analysis must be performed by a human to decipher the nuance of each trade scenario. But once you have analyzed your setup and identified the main components, using automation to execute your trade analysis is a strong edge in your trade. The human mind and intuition are critical pieces of discovering trades. Robotic execution is critical in having a winning trade. Automation is the combination of these two.
The foundation of Parametric Trading is the use of technical analysis to identify key trade parameters, to work within a set of rules and to execute those rules in combination with the trade parameters consistently.
The standard retail trader, aka the Dumb Money, uses common, trailing indicators for their analysis. While this works in backtesting they often fall short in real time. If you’re committed to maximizing your trading edge then using a parametric approach will give you flexibility and nuance to your trade management which gives you a decidedly sharp edge in the market.