Non-predictive


In the core of Captain Algorithm is an innovative approach to the Forex trading quandary : a non-predictive approach.

 

What Captain Algorithm is betting on is the fact that foreign exchange markets will always fluctuate. And the longer the period of time one consider, the likelier the market will fluctuate with a larger amplitude - i.e. the difference between the maximum and the minimum price considered over a longer period of time is likelier to be larger.

 

Let's consider for instance that Captain Algorithm enters the market with a Buy position (B1) at a price line (P1). This position will be a loss if the market will be below the price line (P1) and inversely a profit if the market will be above the price line (P1).

 

As the market will be moving away from the price line (P1), either the position taken by Captain Algorithm will be a higher profit or a higher loss. So two possibilities will arise :

 

(1) : if position (B1) will be sufficiently profitable Captain Algorithm will automatically close the position and earn a profit.
(2) : if position (B1) will be a loss, passed a certain threshold Captain Algorithm will close the position (B1), consent to the subsequent loss and immediately open a new Sell position (S2) at a price line (P2) - below the price line (P1).

 

Once again - if the process would not have finished profitably on (1) - the market will be moving away from the price line (P2), and two possibilities similar to (1) and (2) will arise :

 

(1b) : if position (S2) will be sufficiently profitable i.e. making a profit minus the loss of the previous Buy position (B1) Captain Algorithm will automatically close the position and earn a profit.
(2b) : if position (S2) will be a loss, passed a certain threshold Captain Algorithm will close the position (S2), consent to the subsequent loss and immediately open a new Buy position (B3) at the price line (P1). Please note that if (S2) will be a loss than the market will have to move back to the price line (P1) above (P2).

 

Once more - if the process would not have finished profitably on (1b) - the market will be moving away from the price line (P1). And Captain Algorithm will repeat the process described above until the market will have moved away for good from both the price lines (P1) and (P2).

 

Thus the last position taken by Captain Algorithm will either be a Buy or a Sell position at respectively the price line (P1) and (P2) but will always be profitable - as the market will have eventually moved away from both (P1) and (P2).

 

Considering that the market will have moved away sufficiently from the price lines (P1) and (P2), the last position taken by Captain Algorithm will be sufficiently profitable to both recover the successive losses consented during the process and make a profit. The process described above corresponds to the case in which Captain Algorithm will be trading with only one pair of price lines for a given symbol.

 

In reality for one symbol, Captain Algorithm will reproduce this process over multiple pairs of price lines (P1')/(P2'),(P1'')/(P2''),(P1''')/(P2'''), etc. Thus Captain Algorithm will be stacking all positions for one symbol. By stacking positions together Captain Algorithm will reduce the amplitude of market fluctuation required to recover losses and make a profit out of the series. Indeed when the profits and losses of multiple pairs of price lines are compounded together, the more profitable will compensate for the less profitable.

 

Such trading strategy allows Captain Algorithm to achieve profits without being obliged to predict whether prices will go up or down.

 

 

AutoMATED


Following the description of the trading pattern above, one has to realise how many numerous automated tasks Captain Algorithm has to perform.

 

Captain Algorithm will be constantly monitoring markets and communalising information in order to decide trading opportunities and manage ongoing positions.

 

Of course the managed orders will not be behaving as neatly as described earlier. Under specific market conditions Captain Algorithm will have to make adequate adjustments. For instance Captain Algorithm will automatically increase the gap between price lines under high volatility period. Price slips or even gaps will force Captain Algorithm to readjust the price lines and their respective Stop Losses. Captain Algorithm will constantly have to add new positions to a chart or modify existing positions, etc.

 

In other words Captain Algorithm will be continuously piloting the trade positions it has taken 24/24 7/7.

 

 

Account rating


As all good seamen must know : even though one knows the seas as the back of one's hand, a safe passage relies on the boat as well. To cross open seas on a dinghy is just good to test someone's faith.

 

Similarly the safety of Forex and/or CFDs trading depends largely on the trading conditions of a given trading account.

 

Since Captain Algorithm trades with a fairly deterministic methodology, it is possible to measure the safety level of an account. Knowing that the longer the period of time considered, the likelier the amplitude of market fluctuation will be larger, Captain Algorithm will assess the ability of an account to cope with adverse market evolution - i.e. when the market stagnates and lacks of amplitude. Captain Algorithm will measure for how long it can keep on trading under market stagnation condition. Said otherwise the longer a trading account can withstand a period of stagnation, the safer such trading account is - for the assumption of Captain Algorithm is that prices will eventually move away from their current levels given enough time.

 

Such measure gives an approximation of the resistance level of a trading account in relation to the trading methodology of Captain Algorithm.

 

Thus any given trading account, because of the specificity of its trading conditions (for instance the leverage, the typical spread, etc.) will have a score and a rating.

 

The higher the score and the rating of an account is, the safer and potentially more profitable the trading with Captain Algorithm is.