Automating supply and demand trading

October 5, 2017 by Sarid Harper

Over the past few years I have found that the best way to improve the quality of Pipnotics’ discretionary trading software was to create an algorithmic trader that used the signals provided by the tools to place trades, at least this way it would be possible to quantify the validity of the signals. This I did with for currency strength (for more information have a look here), which helped me improve the usability and quality of the software, and now I am doing it again only this time with focus on supply and demand. Let’s have a closer look.

Understanding supply and demand is about understanding the role liquidity plays in the way a given market moves. It is a fascinating concept and one the understanding of which will lead you to make better trading decisions. Understanding what it is that makes the price of a security move will simply make you a better trader, as it will bring your attention to something you aren’t seeing when you look at a price chart.

But isn’t technical analysis about making trading decisions based on what you see on a price chart?

Yes, and how is that for a paradox!

Each month I do webinars for my users and for my friends in Barcelona, FX Street. Most recently I discussed a research project I am currently working on at Pipnotic, which focuses on how one might go about automating a supply and demand strategy, two topics that fill me with so much excitement that they often keep me up at night as I ponder them whilst trying to better my understanding of them. In recent years I have worked on automating a currency strength strategy and now my focus is supply and demand. These concepts, when combined are very powerful for the discretionary trader, and worthy of a combined study in the future.

The following is a recording of the aforementioned webinar where I explain the details of the strategy, and discuss the trades taken so far.

The featured image for this post is of a body of water, an ocean, which I think nicely represents the concept of liquidity. What a beautiful scene.

Thank you.