TRADING SYSTEMS
FX
Tere must also be an uninterrupted connection, with low latency to the execution venue, which itself cannot have any downtime.
Any single
point of failurecan cause a complete failure of the trading ‘ecosystem’, as everything is interdependent.
Conclusion
While automating FX trading strategies can be very straightforward, simply ‘plugging into’ a broker who offers that facility, it usually comes at the cost of less efficient execution, than using a bespoke solution.
Figure 8: Automation Environment visually plotting the captured in MultiCharts™, showing the orders generated and then executed via Currenex
Dangers execution
of automated
While automated execution may seem an obvious solution to efficient execution, there are many inherent dangers involved. While it’s evident that
executing an automated
trading strategy efficiently requires computers and programming, this comes with its own risks, as we’ve seen in the press on many occasions, from the ‘flash crash’ of May 2010 to companies with significant resources, such as Knight Capital and Goldman Sachs, each suffering losses of over USD $400mio and USD $100mio respectively, in a matter of minutes, to name use just a few of the more high profile examples, of the countless that could be cited; with that number no doubt continuing to grow. While
automated execution can be a great asset, it’s also something that must be respected and treated with great caution.
Te reason for there being so many examples of trading errors, using automated
trading, are probably
because there are so many single points of failure.
To execute an automated trading strategy you need a clean, uninterrupted data feed, providing rates to the algorithm. Te algorithm must have no errors and be able to cope with times when there is a problem with the data or connections. Te computer where the system resides must have uninterrupted ‘uptime’ for everything from the soſtware itself, to the OS, internet and power.
We believe the solution we have built, with CTR’s help, is efficient and robust, though we are always striving to improve the systems, infrastructure and process. We hope that our experiences will help others following the same path towards automating their FX trading strategies.
Automation should be treated as an auto-pilot, to assist in execution, always monitored, with someone never
far from the controls, ready
to intervene, rather than a ‘fire and forget’ solution; as
there is always
something that can go wrong, and there will always be the ‘unknown unknowns’.
Caspar Marney
With special thanks to Sergio at Cambridge Trading Research, Nick and Nik at Currenex and Alan, Hang and Peter at KCG HotSpot and Kieran at Liquid-X.
FX TRADER MAGAZINE October - December 2013 35
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