From the course: Algorithmic Trading and Finance Models with Python, R, and Stata Essential Training

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Prop trading with algos

Prop trading with algos

From the course: Algorithmic Trading and Finance Models with Python, R, and Stata Essential Training

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Prop trading with algos

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- [Instructor] How do you go about building an algorithm? Well, there's certain steps that are involved. First, we have to start by defining a trading hypothesis and a goal. Now essentially this means that we need to come up with programmable rules. These have to be things where they're able to be coded, they can't be subjective. You can't talk about we're going to buy the best stock out there, what does that even mean? We need to say specifically, we buy stocks when they fall five percent, or when earnings are advancing the fastest that they have over the last 12 months, or something similar. You've got to have a codable rule determining when you're going to buy or sell. Then, we've got to go through and set operating time horizons and constraints. This requires that we're going to pull in data and performance statistics that we can monitor over time. Typically, humans are going to program these algorithms, and then they're going to provide oversight to the algorithms, but the…

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