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Trading Systems: Find the Right Algo Strategies for You

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Trading systems replace traditional discretionary trading with algorithms that automatically execute trades based on predetermined market conditions. Although systems are rigid in their execution, much like discretionary strategies, there are various approaches and methodologies utilized to trade the markets.

While all trading systems use a set of specific parameters to trigger buy and sell signals, each has a unique underlying methodology. The majority of trading systems incorporate technical analysis and some take fundamental analysis into account as well.

Types of Trading Systems

Trading systems are most generally categorized as either intraday or swing.

  • Intraday strategies will only hold positions over the course of one trading session. For a trader who wishes to exit all positions before the market close, an intraday strategy would be a likely choice.
  • Swing strategies might hold positions for several days or even weeks. A trader who is open to holding positions overnight might prefer a swing strategy.

Fortunately, since multiple systems can concurrently, traders may choose to employ both types of strategies for a well-rounded approach.

Trend Following vs Countertrend

The majority of trading systems are based on trend following logic. That is, an algorithm essentially waits for the correct signal and places buy or sell orders to capture market movement within a market trend. Lagging indicators, such as RSI and SMA, are commonly used when designing trend following systems.

Countertrend systems approach the markets with the opposite methodology, seeking opportunities to “buck the trend.” A countertrend system may be designed to wait for signal of a weakening trend, or may monitor the markets for new lows or highs and place orders based on that information.

A well-diversified systems plan might include a combination of both trend and countertrend systems.

NinjaTrader provides access to over 850 professionally developed and backtested trading systems. Traders can fully research the available strategies and filter by performance, markets traded, required capital and more.

Each strategy provides full transparency with access to tracked historical and live performance. Please remember, past performance is not always indicative of future results and a backtested system does not guarantee future success.

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