If you want to become a successful trader whether algorithmically or discretionally; it is essential to ask yourself some honest questions. With trading, you could lose money at an alarming rate and therefore, it is important to ‘know thyself’ as much as it is necessary to understand your chosen strategy.
The most important consideration in trading is being aware or apprised of your own personality. Algorithm trading requires a considerable sense of discipline, patience and emotional detachment. As you are allowing an algorithm making trading for you, it is important to be resolved so that it does not interferes with the strategy when being executed. Many algorithm trading strategies that have been highly profitable in a back test can be easily ruined with a simple interference. Entering the world of algorithmic trading will test you emotionally and in order to be successful, it is important to work through such difficulties.
Secondly, the most important thig to carry out is continuous research about your trading strategies in order to maintain a constantly profitable portfolio. There are some strategies that always stay under the radar; therefore, a significant amount of time is required to carry out an ongoing research for trading strategies.
Thirdly, you also need to consider your trading capital. The generally accepted minimum amount for a particular quantitative strategy is around 50,000 USD. It is always advised to begin with a larger amount because transaction costs can be extremely expensive for mid to high frequency strategies and if you are beginning with less than 10000 USD, you will need to restrict yourself to the low-frequency strategies, as the cost of transactions will east into your returns.
Programming skills is another significant factor in creating algorithm trading strategies. Being expert in programming languages like C , Java, C#, Python or R will help you create end-to-end data storage, back test engine and the execution system by yourself. This comes with number of benefits, key of which is the ability to be completely aware of all aspects of the trading infrastructure. Therefore, you can easily explore high frequency trading strategies as you will be in complete control of your technology stack.
Ultimately, you need to ask yourself what you actually hope to achieve with the help of algorithm trading strategies.
Make sure that you are not mislead by the notion of becoming extremely wealthy in a short notice of time. Remember, algo trading is not a scheme to get rich. It is rather a practice that requires significant discipline, continual research, and patience to be successful at algorithm trading.