Effective trading system on the stock exchange. Review of the new law on organized tenders. Risk of trading on the stock exchange

Russian Trading System

(RTS)

Russian Trading System is an over-the-counter trading system

Russian Trading System: about the history of the RTS, RTS markets, RTS, the role of the Russian Trading System

Russian Trading System is, definition

This is the first and so far the only truly functioning system of over-the-counter securities trading in the Russian Federation

RTS is a Russian stock exchange that trades on stock market, as well as derivative financial instruments.

History of the Russian trading system

Russian Trading System (RTS)- the largest trading platform specializing exclusively in trade corporate securities; not a single Russian one, even such large ones as the Moscow Interbank Currency stock exchange, Moscow stock Exchange and others in the field trade corporate securities do not constitute noticeable competition to this over-the-counter system, neither in terms of the number of issuers of shares that are listed on these trading platforms, nor in terms of the number of participants bidding, nor by volume bidding. And although the exchange sector of the market has recently been trying to increase the volume of trading in corporate securities, the over-the-counter sector represented by the Russian Trading System (RTS) remains the leader in this area.

This situation has arisen as a result of the specific development of the Russian stock market. A huge number of equity markets that emerged in the early 1990s initially focused on trading currencies, bearer securities, and, more recently, vouchers and government securities, without paying any attention to trading in corporate shares. At that stage of development of the Russian market this was natural, since despite the appearance as a result of voucher privatization of a large number of shares of a variety of issuers, there was no one at all seriously interested in trading these securities. There were no investors willing to take risks at that time to invest money in shares that had just been “born” enterprises. There were no paper sellers, as there was no intention in the near future privatization time to release blocks of shares from their hands, and small owners who received their shares in exchange for vouchers were not ready to part with their shares immediately after receiving them. There was no interest of the issuers themselves in trading their shares, which was sometimes caused by fear, and sometimes by ignorance and misunderstanding of why they needed it and what advantages a permanent shareholder could provide with their shares. There were also no professional participants in the securities market ready to serve this market; not to mention the complete absence of complex infrastructure with all its integral attributes: registrars, depositories, clearing centers, etc., the presence of which requires corporate securities. The vacuum in legislation that existed at that time, which has not been fully filled even now, was also a strong factor hindering the development of the industrial stock market. enterprises.

Exchanges we missed the moment when the first participants interested in the formation of the corporate shares market appeared. Initially, these interested parties were investors, primarily large foreign investment funds (mutual funds), who turned to the Russian stock market and saw prospects for investing in shares of Russian enterprises. Naturally, after them, the first Russian investment organizations appeared, which at the initial stage only served the interests of foreign investors. However, it soon became clear that without an organized system of stock trading, the activities developed by the pioneers of the Russian corporate securities market became futile and insufficiently effective. Since exchanges showed no interest in trading stocks, the only opportunity to create a trading system was company over-the-counter trading between members of the association who have voluntarily committed to adhere to mutual agreements, rules of information openness and uniform document flow.

As a result of numerous negotiations, consultations and searches for mutual compromises, the American model of the stock exchange, which implied its management with the help of self-regulatory organizations, was adopted as the basis for the method of building the future association and the Russian corporate securities market as a whole.

Finally, on May 15, 1994, in Moscow, representatives of 15 leading brokerage companies officially established the Professional Share Market Participants (PAUFOR) and approved its charter. The initial objectives of PAUFOR, announced at the board of directors on August 5, 1994, were to develop standards for securities trading and a set of disciplinary measures for violators, as well as the creation of an over-the-counter computer trading system for association members. Already in September 1994, the first version of the PAUFOR rules was adopted, which made it possible to immediately move on to the active creation of a trading system.

However, the consolidation of brokerage firms into a self-regulatory organism did not only take place in Moscow. A number of regional investment companies in Novosibirsk, St. Petersburg, and Yekaterinburg have united into unions similar to PAUFOR. Over time, joint work on the stock market according to similar rules brought closer the positions of PAUFOR and independent regional brokerage organizations. In the fall of 1995, it became completely clear that merger of enterprises of all brokerage associations into a single all-Russian company not only will it not infringe on their rights, but, on the contrary, will allow them to better coordinate efforts and more consistently defend their interests. Therefore, having gathered in Moscow on November 30, 1995, representatives of four regional associations announced the creation of an interregional mergers of enterprises participants of the PAUFOR stock exchange Russian Federation, which became the prototype of the future self-regulating all-Russian company - NAUFOR.

Now association unites 860 companies located in 10 regions Russian Federation and has its branches in St. Petersburg, Novosibirsk, Yekaterinburg, Volgograd, Nizhny Novgorod, Rostov-on-Don.

At the beginning of 1994, when the Job to create a trading system directly, based on the fact that the American path of development of the securities market was initially chosen, the choice of the American model of the over-the-counter stock market was also logical. The Russian Trading System (RTS), which was created at that time, was, in fact, a complete analogue of the American over-the-counter Nasdaq Composite system (National association of enterprises Of negotiable paper Dealers Automated negotiable paper - National association Stock Dealers for Automated Trading), which is the world's largest securities trading platform.

To service the over-the-counter stock market, it was decided to choose the second from two systems - Programbank and the American PORTAL, since it had already proven itself well in the American market. Its version, modified for the Russian Federation, was a two-way connection between users located in their offices and the central server. At the end of 1994, the system was installed in brokerage firms - members of PAUFOR and the first trials were carried out.

Initially, the PORTAL performed rather informational functions, since most of the quotes displayed in it were indicative, and therefore optional. It was only in May 1995, when indicative prices were abolished and the quotes posted in the system became binding, that regular trading in shares began.

In the summer of 1995, the PORTAL was replaced by the Russian Trading System (RTS) (RTS), and soon its terminals appeared in other cities countries. Initially, shares of seven issuers were firmly quoted on the RTS, and the system itself linked four large over-the-counter markets into a single network countries: Moscow, St. Petersburg, Novosibirsk and Yekaterinburg. Currently, out of 600 NAUFOR members, more than 500 companies are connected to the RTS, with more than 750 client workstations installed.

Trading on the RTS is carried out as follows. Trading participants enter their offers to buy and sell shares into the central computer through remote terminals. Entered offers are displayed on the terminals of all trading participants. If one of the trading participants wishes to make a transaction on the proposed terms, then he contacts the trader who submitted the application by telephone and negotiates a transaction with him.

RTS markets

RTS Standard

Russia Trading System Standard is the most advanced in the Russian Federation, which embodies all modern world-class exchange technologies. It is aimed at the widest range of participants: professional stock exchange participants, institutional investors, hedge funds and private investors.

The trading mechanism in Russia Trading System Standard does not imply the presence of 100% of assets at the time of execution of the contract. In practice, this means that buying 10 securities at price 1500 rubles will be required from the investor for the conclusion agreements not 15,000 rubles, but 2,500-3,000 rubles. Fulfillment of obligations occurs on the 4th day. At the same time, the execution of all transactions is guaranteed as Central, which significantly reduces the risks of non-execution. Tradable instruments - 20 most liquid shares of Russian companies. The Russia Trading System Standard market implements a mechanism for trading stocks and derivatives (futures contracts and options) in a single system.

Main characteristics:

No 100% pre-deposit

Calculations for T+4.

Quotation currency and settlements for the transaction - Russian Rubles

Central counterparty- party to each transaction

Co-margining with a FORTS spot market position

RTS Classica

Russia Trading System Classica is the oldest organized securities market in the Russian Federation. Began work July 5, 1995. Then trading participants who owned RTS terminals could post quotes for Russian shares and telephone set negotiate conclusion and execution concessions. Today, the main principles of trading on Russia Trading System Classica are the absence of 100% preliminary deposit, the choice of date and payment method, and the possibility of settlements in foreign currency. There is no need for preliminary transfer of securities and funds for trading, which ensures high efficiency of operations.

Today, Russia Trading System Classica offers a wide range of securities - more than 540 stocks, bonds and investment shares. actively develops trading technologies, creating conditions for increasing the profitability and efficiency of transactions carried out by market participants.

Thus, the most significant event for the entire organized securities market of the Russian Federation in 2007 was the introduction by the RTS Group of technology for concluding transactions through the Central counterparty. This technology is used in the Classic Market Electronic Trading Mode and in the Full Pre-Escrow Trading Mode assets Exchange market. OJSC "RTS Stock Exchange" became the first exchange in the Russian Federation to launch the Central Counterparty transaction technology, which is widely used by leading exchange platforms around the world.

In 2008, RTS became the first exchange platform in the Russian Federation to launch netting in trading mode without 100% preliminary depositing. The introduction of netting led to a reduction in the overall costs of market participants when conducting transactions, simplified settlements for transactions and increased efficiency in general. In addition, the netting technology, unique to the Russian market, significantly facilitated the work of participants’ back offices and allowed brokers to offer their clients more favorable terms of service on the Russian stock market. An important consequence of the introduction of netting was the creation of competitive advantages for brokers providing direct access to this RTS trading mode to their clients, both residents and non-residents, using Internet trading systems.

Futures and options market FORTS

Spot market FORTS is a leading trading platform futures transactions And options in the Russian Federation and Eastern Europe, as well as one of the largest markets in the world for trade derivative financial instruments. According to one of the largest independent derivatives associations terminal transactions industry trust for the first 2 months of 2009, futures market and options FORTS is in 9th place in terms of trading volume among all derivatives exchanges in the world.

According to this indicator, it bypassed such well-known sites as

American Stock Exchange,

Zhengzhou Commodity Exchange,

Hong Kong Exchanges & Clearing,

London metal exchange.

Currently, futures contracts and options are traded on the FORTS market, the underlying assets which are: RTS, industry indices, shares and bonds of Russian issuers, government. bonds, foreign currency, average overnight loan rate MosIBOR and three-month loan rate loans MosPrime, as well as goods - Urals and Brent oil, diesel fuel, gold, sugar.

RTS Board

Russia Trading System Board is an information system of OJSC RTS Stock Exchange designed for indicative quoting of securities not admitted to trading on the RTS. The system was put into operation on February 15, 2001.

In accordance with the “Procedure for creating a list of instruments of the Russia Trading System Board information system” approved by the Board of Directors of RTS OJSC, the system may include shares, bonds, investment shares, securities issued by Russian and foreign issuers.

From the point of view of issuers, the Russia Trading System Board is a simple and effective tool for initially increasing the liquidity of securities, the task of which is to draw the attention of investors to promising securities.

Thus, issuers have the opportunity to “present” their securities to the professional investment community, with a view to their further promotion, as well as their listing on the RTS exchange trading.

At the moment, Russia Trading System Board is the leader in the Russian Federation in terms of the number of securities listed on it. It includes 1,780 securities from 1,344 issuers.

The Russian Trading System (RTS) is a large exchange structure on which securities are traded, accessible to both private investors and large companies and investment funds.

RTS was created in 1995 after the merger of several regional trading platforms into an organized securities market. Initially, RTS was created as an over-the-counter alternative. Bidders agreed on the deal over the phone, after which they submitted their bids in the electronic system.

Now the RTS is a full-fledged stock exchange where hundreds of different securities are traded. From the trading system, RTS has grown into a group that not only organizes trading, but also provides a wide range of additional services (clearing, depository, settlement).

RTS Group structure

OJSC Stock Exchange "Russian Trading System" (controls the activities of all other structures);
NPO CJSC "RTS Clearing House";
CJSC RTS Clearing Center;
CJSC Depository Clearing Company;
OJSC "St. Petersburg Exchange";
LLC "Technical Center RTS".

In addition, the RTS group includes a number of foreign exchange organizations located in Kazakhstan, Ukraine and England.

Activities of RTS

The RTS currently operates several trading platforms, both exchange-traded and over-the-counter, as well as a derivatives market. Let's look at each of them in detail.

Stock market

There are 4 platforms within the RTS stock market: RTS Classic, RTS Standard, RTS Start and the T+0 market.

Classic securities market

The RTS Classic market is the oldest organized platform for trading securities in Russia (it has been operating since the foundation of the exchange in 1995).

Features of the FORTS market

relatively low costs for transactions for the purchase/sale of assets;
no additional indirect costs (payment service fees and depository fees);
great opportunities to use various trading strategies;
the possibility of insurance against price fluctuations for certain assets (, dollar exchange rate);
partial deposit of funds (initial margin);
carrying out transactions with guaranteed income (for example, we sell futures and buy shares).

Among the main market opportunities that are available to everyone, it should be noted that speculative transactions with futures securities, as well as hedging (insurance) of existing risks.

Let's take a closer look at how these strategies are implemented for stock futures.

Speculation

Stock futures are an excellent tool for making profits: you can play on the rise or fall in stock prices in order to make a profit.

For example, you expect that in the future the shares of a certain company will increase in price - then you need to buy futures on shares of this company. If, on the contrary, you expect that the shares will fall in price, then you enter into a contract to sell futures.

The advantage of performing transactions on the futures market is also that when concluding a transaction on a futures contract, the investor contributes only a small fraction of the value of the asset (guarantee collateral of about 10-20%).

Consequently, the investor saves on transaction costs.

For example, you want to buy futures on shares of the Alpha company, the total cost of the contract is 100,000 rubles.

However, you will not have to pay the entire amount of the transaction, but only the amount of the guarantee, which is 15,000 rubles (this is what the broker will write off from your account). That is, having spent only 15,000 rubles, you actually bought a contract for 100,000 rubles.

Hedging

In this case, the investor’s actions are aimed at reducing possible risks associated with a fall in the price of his shares. To minimize possible losses in the stock market, the investor enters into a futures contract to sell.

As a result, possible losses on the stock market are compensated by profits received on the FORTS market.

For example, you have shares of the same company “Alpha”, which now cost 100 rubles per share. You are afraid that in a month these shares will fall in price, in order to insure against possible losses, you enter into a futures contract to sell securities at the current price.

Then, if in a month the price of the shares really falls, you will compensate for the losses by selling the shares at the price of 100 rubles, which was indicated when concluding the futures contract.

However, there is one thing: if the price rises, then on the contrary you will lose the opportunity to make a profit. That is, hedging is a kind of insurance, a tool that is aimed only at preventing possible losses, but not at making a profit.

Over-the-counter activities of RTS

RTS's over-the-counter activities include organizing the work of two indicative securities quotation systems: RTS-Board and RTS Global.

RTS Board

RTS Board is a special information system that began operating in 2001 and is designed to carry out indicative quoting of securities that were not admitted to trading on the RTS Stock Exchange.

Unlike the stock market, here we are dealing with quotes that are not based on actually completed transactions. Indicative quotes show that a given security could be sold at a certain price stated by the issuer.

The actual price of the security at the time of the transaction, if one takes place, will depend on a number of additional factors (the volume of the transaction, the day of settlement, the status of the buyer, etc.).

That is, the RTS Board is not a trading system, but an information system that allows potential investors to get acquainted with information about securities that are not admitted to public trading on the stock exchange.

For small domestic issuing companies, the RTS Board is a tool for initially increasing (the speed of sale) the securities they issue, as well as an opportunity to draw the attention of potential investors to new and promising securities.

RTS Global

RTS Global is an RTS project that began its work in 2008. The system allows investors from Russia to gain access to securities of foreign companies.

RTS Global is based on the technologies and operating principles of the RTS Board system, only here investors have access to information about indicative quotes of not domestic, but foreign securities.

In addition, with the help of the RTS Electronic Agreement Center (ECC) and CJSC Depository Clearing Company, Russian investors can, through the RTS Global system, enter into over-the-counter transactions with shares of a number of foreign companies, mainly companies from the CIS countries and Europe.

Thus, CJSC DCC has access to a number of foreign depositories, including:

Clearstream Banking S.A. Luxembourg;
Euroclear Bank S.A./N.V;
National Depository of Ukraine;
"Republican Central Securities Depository" of Belarus;
Central Depository of Kazakhstan.

The emergence of an over-the-counter market for foreign securities in Russia has significantly expanded the boundaries and capabilities of the domestic stock market.

RTS Index

Since the RTS is a stock exchange, it is imperative to talk about the RTS stock index, which has been calculated on the exchange since the beginning of the first trading in September 1995.

The RTS Index is the main indicator of the general condition of the Russian stock market, reflecting its growth or decline.

The principle of operation of the index is the same as that of the index - it reflects the total change in the value of a certain set of securities based on the results of trading.

Only unlike, which takes into account changes in the price of shares of 30 companies, the RTS Index is calculated based on indicators of the dynamics of securities of the 50 largest enterprises in Russia, including:

Aeroflot;
Bashneft;
Severstal;
Gazprom;
MMC Norilsk Nickel;
INTER RAO UES;
LUKOIL;
Sberbank of Russia;
Surgutneftegaz;
and others.

It should also be noted that the RTS Index shows the total market capitalization (value) of shares of companies included in the list, expressed in relative units (points). In this case, unlike the MICEX Index, the value of shares in US dollars is taken for calculation.
Capitalization in this case is defined as the number of outstanding shares multiplied by their actual market value. It reflects the total value of an enterprise at a certain point in time.

Accordingly, if the value of shares of enterprises included in the list for calculation increases, the value of the RTS index also increases, if the value falls, the index falls. The index itself is calculated simply.

Let's say the initial capitalization of the companies was $100,000, the initial index value was 100 points. The companies' capitalization currently amounts to $500,000. Therefore, the index will be equal to 500,000/100,000 * 100 points * 1.0752559 = 537 points (1.0752559 is the established adjustment factor).

It is according to this scheme that the value of the RTS index is determined, the dynamics of which reflect the state of the domestic stock market.

What do you need to become a trading participant on the RTS?

Only legal entities that have licenses to carry out transactions with securities can take part in trading on the RTS markets.

If you want to participate in trading on the exchange as a private investor, then to carry out transactions on the RTS exchange, contact accredited professional intermediaries (brokers, dealers, management companies) who have the appropriate licenses and experience in performing such transactions.

An accessible way to make money for many is trading on the stock exchange. Where to start and how to increase capital? Take trading training to gain basic knowledge and take your first practical steps. As part of the course, a novice trader will learn the basic strategies for trading on the stock exchange: how they are useful and what features are typical for each of them.

Stock trading strategies: what they are and how they work

The right choice of trading strategy for a novice trader is the key to success. A direct road to disappointment for a beginner will be the idea that it is enough to take a ready-made trading strategy, apply it and get a huge profit in your pocket. Following illusions leads away from reality and as a natural result: denial of one of the most accessible ways of earning money.

Trading gives a chance to increase income to a wide range of people, because when trading on the stock exchange, neither gender, nor education, nor age is important. The main thing is to have personal qualities and a good knowledge base, which necessarily includes familiarity with trading strategies.

What are stock trading strategies? This is a system or a clear algorithm of actions with the help of which a trader manages his trading on the stock exchange, makes decisions in order to make a profit during a certain market situation. Trading strategies help to understand the structure of the market, its mechanisms, but, alas, there are no universal strategies for trading on the stock exchange.

If we take complexity as the main criterion, then trading strategies are as follows:

simple (effectiveness and ease of understanding make them suitable for novice traders);
basic (basic trading systems that should be taken into account when creating your own strategy);
advanced (used by experienced traders, but do not operate with a large number of different indicators);
complex (complex methods taking into account many factors that can only be used by traders with extensive practical experience in trading on the stock exchange).

When the time factor is taken as a basis, trading strategies on the stock exchange are usually divided into:

scalping (a large number of transactions in one day with a minimum profit);
intraday trading (during the day, a trader can make a profit due to a slight fluctuation in the price of an asset or on a large intraday trend, while the transactions themselves are opened and closed on the same day);
medium-term (the transaction goes beyond one day, which carries the potential for big profits for the trader);
long-term (used by large players to maximize profits).

Basic stock trading strategies

Clear, simple, effective and also profitable (if used skillfully, taking into account the circumstances) - these are the general criteria that characterize basic trading strategies. Trading training provides a detailed introduction to the basic strategies, but in the future the trader will have to develop his own trading strategy on the stock exchange in order to earn income.

What trading strategies are classified as basic? The list is quite arbitrary and includes strategies that are known, tested and often used by experienced traders, and are also relatively easy to understand for beginners. Taking these factors into account, the main strategies for trading on the stock exchange include the following:

Trading on pullbacks or counter-trend trading (the movement of a price or trend in the stock market is accompanied by a rollback or a period of correction. On the chart this is displayed in the form of a complex broken line, where the trader must be able to find a short period when the price moves against the trend. The market's respite time before the next breakthrough gives the trader the opportunity take the profit).
Trading without stops (the strategy itself is called conditionally; rather, it is an option to exit a position, since the stop loss is a pending order. Choosing this trading strategy requires serious risk control and experience in money management; trading psychology plays a huge role, therefore this trading strategy The exchange is suitable either for professionals or experienced traders, but not for beginners).
Price Action or price movement (it is based on price patterns, trend lines, candlestick patterns and no indicators, i.e. this effective trading strategy helps predict the direction of price movement and when is the best time to open a position).

Other common and used trading strategies in trading include the following:

- Based on a combination of indicators;
- Moving averages;
- Fibonacci levels;
- Ichimoku indicator;
- Japanese candles;
- Fundamental.

Do you want to get training in trading and practice trading on the stock exchange? Come to the courses at the Alexander Purnov School of Trading, where there is a step-by-step program - for beginners from complete scratch to professional. Not sure you want or are ready to do it now? Then subscribe to the blog of the Alexander Purnov School and read useful materials on

Translation

Note:This post was written by British developer and financial analyst Michael Hulls-Moore, who is a professional in the so-called Quantitative trading. From our point of view, the information contained in this topic may be of interest to technical specialists and developers who are interested in the stock market and have the skills to create, for example, successful trading robots, but do not know where to start. Therefore, the topic will be considered in this context; in addition, the text is adapted to Russian realities, and some terms are translated accordingly. We welcome your comments! (It is better to send translation corrections in private messages).

Algorithmic trading is an extremely complex area of finance, and it will take quite a lot of time to master the amount of information that will allow you to create your own trading system or get a job as a developer in a financial company or fund. Extensive experience in programming is simply necessary for successful work in this market; at a minimum, an algorithmic trader must be well versed in languages such as C/C++ (Java is also promising in the field of finance) and Python, Matlab and R ( TradeScript, developed in the USA, is gaining popularity in the Russian market - approx. translation).

Any high frequency trading system consists of four main components:

Strategy identification - that is, determining the trading strategy, exploiting the advantages contained in it and choosing the frequency of trading.
Backtesting of a strategy - obtaining historical data on trading and “running” the strategy on them, analyzing the results and optimizing weak points.
The engine is the part that connects to the brokerage trading system ( ITinvest recently launched a new Matrix system - approx. translation), automatically trades and adapts to changes in the market to reduce costs.
Risk management is the distribution of capital to carry out trading operations in the optimal way, determining the sequence of actions in the event of an unsuccessful set of circumstances on the market.

Let's start from the first point and talk about how to choose a trading strategy.

Trading strategy

In trading, any action is always preceded by the stage of collecting and studying information. Before choosing a strategy for trading, it is necessary to analyze initial data such as the amount of available funds, and also take into account how the new strategy is combined with those already in use. Individual traders are simply obliged to pay great attention to transaction costs and do their best to reduce them; the optimal trading strategy is selected accordingly.

Contrary to the popular belief that “no fool would share a strategy that makes money,” in fact, in public sources you can find information about strategies that actually work. In addition, analysts and scientists sometimes publish the results of their research and financial experiments. There are quite a few blogs on the topic of algorithmic trading in English (in Russia, sometimes interesting topics pop up on the Smart-lab.ru resource), and data on trading strategies of funds sometimes gets into the press.

Of course, no one will discuss in public all the aspects and details of setting up a profitable strategy. The key to profitability lies precisely in understanding what parameters the strategy should have, as well as its “fine tuning”. However, the almost 100% way to create your own strategy is to “steal” other people’s ideas and then refine them.

Most strategies can be divided into two large groups - “playing on inefficiencies” and “following the trend”. The first type of strategy exploits market inefficiencies (for example, spreads in the prices of related financial instruments) and the fact that in the short term the price of assets often returns to their original level. Trend strategies play on the psychology of investors and the actions of funds, trying to “jump” on the train of a new trend and manage to collect profit on this before the movement reverses.

Another important aspect of algorithmic trading is its frequency. Low frequency trading (LFT) involves holding a financial instrument for more than one trading day. Accordingly, with high-frequency trading (HFT), all transactions occur “intraday,” that is, within one trading day. There are also so-called ultra-high frequency strategies (UHFT), which involve holding an asset for seconds or even milliseconds. High-frequency trading has now gained great development in global and Russian markets.

Once a strategy is selected, it is necessary to test its effectiveness on historical data. This process is called backtesting.

Backtesting

The essence of backtesting is to confirm or refute the profitability of a chosen strategy launched on historical data. Knowing the results that a strategy would have shown in the past allows us to assume its effectiveness in the current market situation. Of course, the fact that a strategy brought in a virtual million based on historical data does not guarantee success in the real world.

When backtesting, the most important point is the availability of data on past trading sessions to launch the strategy. There are several ways to obtain this data - brokers and exchanges often provide it, but there are also third-party data providers.

It is also important to determine the metrics that will determine how successfully or unsuccessfully the strategy worked “on history.” The industry standard is the concept of "maximum drawdown" and Sharpe ratio. The maximum drawdown is the maximum loss on a portfolio over a certain period (usually a year). Low-frequency strategies may have greater drawdowns than high-frequency strategies due to certain statistical factors. A backtest will show the maximum portfolio drawdown that could have occurred in the past, which will give a rough idea of what to expect in this regard when working in the real current market. The Sharpe ratio is an indicator of the efficiency of an investment portfolio (asset), which is calculated as the ratio of the average risk premium to the average deviation of the portfolio.

Once the strategy has been tested and all identified bottlenecks have been eliminated, possible drawdowns have been minimized and the Sharpe ratio has been maximized, it’s time to move on to the actual development of the trading engine.

Trade module

The trading engine is the means through which the list of trades to be executed in accordance with the trading strategy is transmitted to the broker's trading system. The process of generating orders can be half or fully automated, and the mechanism for executing them can be manual, half manual (“one click”) or fully automated. For low-frequency strategies, manual or semi-manual order entry is most often used. For HFT strategies where every millisecond matters, a fully automatic method is generally used.

The main points that should be taken into account when developing a trading system are ensuring a reliable and fast connection to the brokerage trading system (usually via an API) or providing direct access to the exchange, minimizing costs (including broker and exchange commissions, as well as possible slippage).

Transaction costs are one of the main things to think about as an HFT trader. They usually consist of three components: broker and exchange commissions (and taxes), slippage (the difference between the price at which a trade was planned to be executed and the price at which it actually took place), and the spread of a particular financial instrument (the difference between the price purchases and sales - bid/ask). The spread is not a permanently fixed value and depends on the current liquidity of the market.

High transaction costs can turn a potentially very profitable strategy with a good Sharpe ratio into a completely unprofitable one and vice versa. It can be quite difficult to correctly predict transaction costs using a backtest; this usually requires obtaining historical tick data from the exchange, including information on bid/ask prices.

It is also necessary to remember the difference between the system's performance in the real world and what it showed in historical data. The difference can be quite significant, and there are many reasons for this. Software bugs and errors in the trading strategy itself may not appear during backtesting, but play an important role in real work on the market.

Examples of creating trading robots using TradeScript.

Risk management

The concept of “risk” includes all of the above-mentioned dangers. The risk consists of technological dangers (for example, a sudden failure of servers), broker risk (company bankruptcy), and in general anything that could potentially interfere with the intended functioning of the trading system.

Part of risk management is the process of optimizing capital (its distribution between various strategies). This is a fairly complex process that involves a lot of "math". The industry standard that describes the relationship between the optimal allocation of capital and obtaining the maximum effect from the work of trading strategies is the Kelly criterion.

Another important component of risk management is determining a trader’s own psychological portrait. Every person has some traits that can hinder successful trading in the market. In the case of algorithmic trading, the psychological effect plays a lesser role than in “manual” trading in the market, but is still present - after all, the trading robot is monitored by a person who may want to record a loss too early or rush to close a position for fear of increasing losses.

conclusions

Algorithmic trading is a very complex area of human endeavor, but it is also a very interesting area of finance. In order to have a chance of achieving success in this matter, you simply need to master programming at a good level. You need to train yourself by creating trading modules yourself (trading engines, data analyzers, tools for backtesting strategies), using available resources - after all, we are talking about your own money, which no one wants to lose.

Anyone can make money on the stock market, almost everyone knows this, but let's take a look at the sad statistics, according to which 70% of all newcomers who come to the market leave it at a loss, another 20 - 25% stop trading after they understand that that they have been trading for zero for a long time, and only 5% are starting to earn money consistently. A logical question arises, what is the reason?

Yes, some people lack knowledge, but reading many books does not give the desired result. In this case, perhaps there is not enough experience? But they continue to lose even after a long time of trading. So what’s the matter, is it really possible for only a few to make money in the market? Not at all.
Of course, it is easier for some to succeed here, more difficult for others, but almost anyone can do it. Just remember Richard Denis, who in the second half of the last century made a bet with his friend, recruited 23 people from the street, gave them money and taught them how to trade on the stock exchange. And these 23 people, later called "turtles", earned millions of dollars for him and themselves.

The main tool that allows you to make trading on the market profitable is the trading system. The fact is that in order to consistently make a profit from trading in financial markets, you must strictly adhere to certain rules, which the investor himself determines for himself empirically. A set of such rules that determine the moment of entry and exit from the market, the volume of investments and the choice of financial instrument is called a trading system.

In the market, a person is faced with a huge numberpsychological problems. But psychology is the key to success. The main human problem in trading is greed. It prevents you from closing a losing position (every time you hope that the market will reverse) and holding a profitable position (you want to lock in the profit as soon as possible in order to see an increase in funds in your account, albeit minimally). You will open positions in excitement, try to win back, and amid emotions you will lose your sense of the reality of the market. As a result, this will result in loss of the deposit. To combat this, experienced traders use a trading system (TS).

In theory, vehicles are divided into three types:
- trendy,
- counter-trend,
- pattern recognition

*Riscophobes - people who do not like risk, prefer to sacrifice part of the profit to reduce risks.
**Riscophiles are the opposite of riskophobes. They prefer riskier transactions, even if this is not justified in terms of potential profitability.

However, the investor is not limited to choosing only one of the above types of trading systems. A trader can at will combine and combine any types of trading vehicles, if this allows him to make a profit from trading. But the system is needed because trading in the financial market is associated with great emotional overload, and this reduces the effectiveness of trading. If you trade strictly according to the TS, then the psychological pressure can be leveled to a large extent.

How to develop a trading system?

The methodology for developing a trading system is as follows: it is necessary to find a pattern of market reaction to this or that information obtained during technical or fundamental analysis, and define strict rules for its use. But there should not be too many or few rules. For example, a strategy based on one rule will not give the desired effect, and an excessive number of rules will only complicate the process and can be harmful. The strategy should be simple and understandable to the investor. Any emotionality should be excluded from trading and the established rules should be strictly followed. A well-thought-out strategy should be formulated in such a way that information cannot be perceived in two ways. A person should have no choice because selectively applying a strategy is likely to produce a losing result.

Of course, you can not create your own trading system, but use someone else’s, proven one, but this is fraught with failure for two reasons: the first follows from the theory of market efficiency and lies in the fact that the more people use one system, the less effective it is. The second reason can be described by folk wisdom: “it is impossible to understand someone else’s system and explain your own.”

Technical and fundamental analysis provide a huge amount of information, some of which is unnecessary and can confuse the investor. The method for selecting information that an investor will rely on when making an investment decision is simple: you should choose the information that is most understandable and to which the market reacts in the same way over a long period of time.

The average TS is based on four to five indicators of technical and fundamental analysis. Coming up with a strategy is not so difficult; it is much more difficult to prove its profitability and strictly adhere to the established rules. And since the market tends to change, the trading strategy must be constantly refined and changed so as not to lose all your capital at one point.

Example of a trading system

As an example, we can give a very simple trading system based on 2 technical instruments - moving averages and static support and resistance levels. Resistance and support levels are the boundaries of the corridor in which the price fluctuates during a sideways trend, and moving averages are certain curves of the average prices of a financial instrument over a certain period of time. If fundamental information tells us that the price needs to change, then we can enter the market when the support or resistance line is broken, and exit (close positions) when the moving averages cross, which indicates a change in the market trend. An example of the implementation of this system is shown in the figure (hourly chart of Sberbank shares August - September 2011).

Thus, if your trading does not bring profit, do not rush to conclude that this is not possible for you. Try to create YOUR own trading system based on rules that are convenient for YOU, test it on historical data, confirm the results on the real market with small trading volumes, adjust the rules if necessary, and become another example of the fact that everyone can make money on the market!

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