Building Trades

As more and more traders have moved to automated trading, the interest in systematic trading strategies has increased. While some traders develop their own trading strategies, the steep learning curve required to develop and implement a trading system is an impediment to many traders. A recently developed solution to this problem is the use of computer algorithms to automatically generate trading system code. The goal of this approach is to automate many of the steps in the traditional process of developing trading systems.

Automatic code generation software for building trading systems is often based on genetic programming (GP), which belongs to a class of techniques called evolutionary algorithms. Evolutionary algorithms and GP in particular were developed by researchers in artificial intelligence based on the biological concepts of reproduction and evolution. A GP algorithm evolves a population of trading strategies from an initial population of randomly generated members. Members of the population compete against each other based on their fitness. The fitter members are selected as parents to produce a new member of the population, which replaces a weaker (less fit) member.

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