Indicators and Algo tradings

A journey through the financial markets can raise a variety of questions.

The first question: 

What lead professionals and/or individuals to succeed in the financial markets?

As for the professionals, they manage capital on the financial markets for their clients (management known as "for third parties"). To understand their function, it is necessary to look at the two sources of remuneration that they take:

-The management fees: They are generated by the service provided; in other words, independent of the loss or profit on the capital of clients, the charge a fee for the management service.

-Performance-related commissions: These are paid in the situation of gain. These remunerations are only honored in the event of a gain, or a gain higher than the amount agreed in advance.

Over the decades, management fees have lost value at the eyes of managers. At the same time, performance-related commissions attract significant interest as the source of income. Of course, there are different types of managers, situations - and remuneration - depending on the framework, the context, the management style, the financial institution, the country, ...

The major problem in the world of management is that one of the main theoretical models[1] is leading a growing proportion of managers to give up active management (i.e., in short, trying to beat the market, in other words - roughly speaking - outperforming the major indices). These managers are called as passive managers who benefit from advances in financial informatic technology (automation of processes to replicate indexes, at lower management cost). Thus, the world of passive management give up performance fees, but make it up by management fees that are more profitable (through lower costs on the one hand, and manage more amount of money on the other), more regular (because they do not depend on results) and therefore less stressful.

Facing with this world of passive managers, active managers are defending themselves. They try to find increasingly subtle but insightful models (movements on the financial markets) in an attempt to "beat the markets". The best ones succeed... but they are few.

On the other hand, the management industry is offering less and less of these funds to the public. They have to accept to be satisfied with standardized product that are heavily charged with various and varied fees, very often coming from the world of passive management. Hence, more and more people who are not market professionals are willing to try their luck on the markets.

[1] Based on the Financial Market Efficiency Hypothesis.

The second question :

If you're reading this part, you take an important and smart step: you're taking behavioral finance into account, or at least you're ready to do so.

Broadly speaking, you know that alongside the fundamental explanation of market movements (why this or that market rises or falls, depending on the fundamental approach of the economy), and without giving up beating the markets, there is a so-called technical approach which, exploiting permanently from prediction of human behavior (admittedly numerous and varied) uses a set of tools grouped together under the name of technical analysis.

You know, moreover, this approach has been strongly decried by theoretical models (Hypothesis of Efficiency of Financial Markets) and by many professionals for several decades (globally for nearly 40 years). The power of Informatic Technology tools and the falling prices of the tools needed cause this approach coming back in force, but certainly they are not the only reasons.

So why does trading based on technical analysis offered to individuals have - wrongly - a bad reputation?

The answer is disconcerting and requires careful attention.

Let's consider a very effective analogy. More and more large chains of DIY stores are offering the general public high-performance tools that are as effective as those used by professionals. The choice is considerable, and the videos on Internet promise you to achieve what you want like a pro.

You dream, you hope, you buy. Unless you are very well advised, you are far from what a pro (many years of training, many years of experience) will manage to achieve.

Another case – Let us just say - just because some filmmakers try to make films with a camcorder doesn't mean that any camcorder buyer will be able to do the same.

It is exactly the same thing happening in trading.

The tools offered are very similar (and in some cases almost identical) to those used by professionals, but have you taken the time to train yourself to :

  • Decide your objectives in terms of risk/performance?
  • Decide on your personal investment in terms of time/energy spent trading?
  • Decide on your investment (time/cost) to train yourself (understand and/or achieve) ?

Too many trading candidates fail because the absence of one or the other of these actions. The statistics on this subject among financial professionals are not very good. There are barely 3% of retail traders who manage to make their capital grow, with regularity and at acceptable risk. Of course, these statistics vary from case to case, and are not official, but the order of magnitude is there.

The reason is simple, lack of training from the initial choices to implementation.

Gravity Markets have observed what happened and is ready to offer you this access to the financial markets under good conditions.

A gradual offer

Gravity Markets' initial offer is a set of efficient trading tools in an optimal framework :

  • Security of the tools,
  • Legal security,
  • Harmonization among all service providers.

This basic offer is typically suitable for a former market professional who, having become independent, wants to implement his experience in an efficient framework. He wants clarity and transparency on all services and tools at a competitive cost. This is the case.

From this initial offer, a set of services are provided to improve his use of the tools :

  • Implementation ofpersonal indicators (we provide a user-friendly package which integrates code into existing trading tools), for the private trader who does not have the time, or the competence, to code his tools. At this level, the private trader knows what he wants and above all asks to be free from the complexity of implementation. The private trader will carry out his trading manually assisted by his personal indicators.
  • Assistance in the design and implementation of the personal tools presented above, for the client who has precise ideas of the markets but wishes to be assisted in the reasonable choice of indicators suitable for him (risk/performance ratio) and who wishes to benefit from assistance in the back-testing of his personal tools. As in the previous point, the private trader will carry out his trading manually assisted by his personal indicators.
  • In this case, the assistance is based on the the implementation of more or less automatic algorithms. With two possible levels depending on whether the client has a precise idea of what he wants and of what he wished to be assisted in the realization, or whether he has ideas but wants assistance in the design. The objective, for the private trader, is the automation of his trading, i.e. the realization of his operations. In concrete terms, the computer is responsible for all operations, from market surveillance to the launch of orders on the market.

Of course, our clients may wish to be trained in the design of a system and then entrust us with its implementation and testing.

With this graduation of services, GM notes that many individual traders with an interest in trading are too often considered (by brokers) as mere customers with no financial knowledge and no need for it. However, GM notes that many have, in their own field, an expertise that allows them, with the right training, to understand financial markets, and the main aspects of technical analysis and trading in relation to the level of service they choose.

This is why GM offers you truly training in technical analysis and in trading in-depth. Regardless of the level of assistance you choose, the level of support GM can provide will allow you to :

  • Properly choose and measure the risk/reward stakes,
  • Choose the tools that match your profile,
  • Implement the trading style you have chosen.

Gravity Markets insists on the usefulness of these courses. You will be able to choose the level of service that suits you, you will understand the content.

The quality of Gravity Markets' service is based on our desire to help you master your trading. We offer you tools and the right way to use them, from understanding them to proper implementation.

For more information, please contact us.