The Basics of Automated Trading with Andrea Unger

Andrea Unger has won the World Cup Trading Championships four times—the only person to ever achieve that distinction. How did he do it? By embracing an automated trading system. In this episode of How To Trade It, Andrea shares why automated trading is better than discretionary trading, how to find a consistent strategy, and much more. Don’t miss it!

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You’ll want to hear this episode if you are interested in...

  • [1:20] The World Cup Trading Championship
  • [6:59] Automated trading strategy vs discretionary trading
  • [13:24] How to find an automated strategy that’s consistent
  • [23:08] How important is the market that you’re trading?
  • [26:15] The Monte Carlo Simulation
  • [30:26] A simple strategy for traders to start with
  • [33:51] Learn more about the Unger Academy

Winning the World Cup Trading Championship

The World Cup Trading Championship requires you to put your own money into the game. Unlike many contests, it lasts for a full year, from January to December. Whoever has the highest percentage performance is the winner. In 2008, Unger ended up 672%. He started with $15,100 and ended with over $119,700. The next year, his performance was 115%. The last competition he won was only 3 months long. He won that with an 82% increase.

Andrea started trading the first championship (in 2008) he was trading the index futures of Italy and Germany. It was a discretionary strategy with some indicators to help. He got 46% performance in one month. He decided to switch to automated trading like he was doing on his main account. Why? Because he was stressed all the time.

Automated trading strategy vs discretionary trading

With discretionary trading, Andrea followed indicators telling him when things moved. He traded by gut feeling and was forced to make continuous decisions. But in his experience, when you try to translate a discretionary approach into an automated strategy you end up getting nowhere. It’s better if you can code your setups and approaches and do backtesting.

His automated approach starts by studying the behavior of markets. What if he enters long every Wednesday when there is a high breakout every Monday? He simulates it, writes the code, and chooses an exit. He tests it. He continues to refine and enhance his approach. If it makes money, he continues to work on it. Measuring the results helps enormously. If it works consistently, then you have a strategy.

Automated trading strategy vs discretionary trading: which is better? Andrea Unger shares his opinion in this episode of How To Trade It! #stocks #stock #trading #AutomatedTrading #automation #futures #options #StockMarket #Investing #DayTrading… Click To Tweet

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How to find an automated strategy that’s consistent

Andrea believes that consistency is affected by two main issues:

  1. The more efficient markets are the most likely your approach will continue to work.
  2. The way you build your strategy is important. If there are too many rules and constraints, it won’t succeed.

Many strategies are built on past data but the future will likely be different. Andrea says perhaps it’s better to use the word “algorithmic” rather than “automatic.” Why? You measure with numbers what is going on. So you build your expectations from a measurable strategy.

Andrea has over 300 strategies, so he takes a different approach—but it’s still measured by performance. He uses a software that’s fed with the performance of his strategies. It then ranks them with the best performing at the top. Every first Saturday of the month he runs his software to get a list of the strategies to put live for the coming month. If Andrea sees that a strategy is going nowhere, it might get removed from his basket. He runs 30 up to 80 strategies a month.

He also uses Monte Carlo simulations to help determine what strategies to use or remove from his lineup. Listen to learn more about it!

A simple strategy for beginners to start with

Andrea suggests that beginners start with the S&P 500. When you find something there that works, it's most likely to continue working. Cryptocurrencies are new and certainly not efficient. But if you use a basic breakout approach, it works—but the question is how long? And how do you manage it? It’s silly to stay out of the markets because they aren’t efficient. They still offer great opportunities. But the question is how long will it behave the way you’re taking advantage of it? It’s hard to answer, so you must set rules in advance. The lack of efficiency leads to enormous moves in the crypto market. But the market constantly moves. That’s why things like the E-mini S&P won’t work with a breakout strategy—it’s too efficient.

Andrea also recommends that you choose a software that is user-friendly in terms of programming. Then you can build simple models of trading. If the idea works, you can develop it into a strategy. He notes that you can start implementing simple concepts. Nothing has to be complicated. People tend to be afraid of automated trading because it seems daunting. But you can play with strategies to discover what the market is telling you.

What is a simple automated trading strategy that beginners can start with? Andrea Unger shares his thoughts in this episode of How To Trade It! #stocks #stock #trading #AutomatedTrading #automation #futures #options #StockMarket #Investing… Click To Tweet

Resources & People Mentioned

  • Get FREE training from Andrea Unger

Connect with Andrea Unger

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