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Track Mechanical trading system
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2019issue C0426-27

Match the automation stack to mechanical system constraints

A mechanical trading system is treated as ready to automate only after it has been specified and tested. Markets, trading style and execution constraints decide whether an automation stack can encode entry, exit and abstention as one procedure.

  • Treat a mechanical strategy as ready to automate only after the procedure has already been specified and tested.
  • The market, holding period and order pattern in the trading style constrain which platforms can encode the same entry, exit and abstention rules.
  • Spread orders, very short-horizon scalping and then-newer crypto venues each impose execution constraints that not every platform can meet.
  • Language choice and platform choice are coupled, from visual builders to general-purpose and trader-oriented proprietary languages.
Entries in this reading1 entry
Current trackMechanical trading system322 readings

Specify and test the procedure first

The archive treats a mechanical strategy as ready to automate only after it has already been specified and tested.

A mechanical trading system is a fixed procedure that turns rule inputs, market state and execution constraints into an entry, exit or abstention signal. The automation stack is the platform and programming environment used to encode that procedure and submit its orders without discretionary rewriting.

Markets and trading style constrain the stack

The markets a procedure trades are presented as first-order constraints on which automation tools can implement it. Those markets include futures, stocks, forex, options or crypto.

Trading style is the combination of market, holding period and order pattern the procedure is built to trade. Trend following, spread trading and scalping are treated as distinct styles. Those styles change which platforms can encode the same entry, exit and abstention rules.

Execution constraints the platform must express

An execution constraint is a venue, latency or order-type limit that can stop a written rule from being submitted as specified.

Very short-horizon scalping is described as a poor fit for most retail platforms. It is more often implemented in custom C++ or dedicated hardware.

Simultaneous long-short spread orders require a platform that can submit those paired instructions as one procedure, and not every platform can. A spread order is a paired instruction to buy one instrument and sell another as one intended position.

Crypto venues are described as a then-newer market that many retail automation platforms still could not reach.

Programming is part of the stack

Encoding algorithmic rules requires programming. The skill range runs from visual builders to general-purpose languages such as C++, C#, Python and R.

Language choice and platform choice are coupled, because each environment exposes a different way to write the same mechanical procedure. That includes trader-oriented proprietary languages.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
18 of 22 in the Mechanical trading system track
201923-23 pp.Next on Mechanical trading systemBar size as a mechanical system construction constraintA mechanical strategy may be specified on one-minute, three-minute, or daily charts; construction is not limited by a minimum valid timeframe.
All readings on this track · 22 readings
  1. 1985Treat a shared mechanical printout as a public script
  2. 1988Pessimistic margin ranking for mechanical systems
  3. 1991From a differenced-average sketch to coded rules
  4. 2003Commodity enthusiasm is not a complete system
  5. 2005Reader surveys as system evaluation checklists
  6. 2008Critiquing unchanged mechanical signals in evolving markets
  7. 2010Read a mechanical trading system catalog as a specification checklist
  8. 2011Specify mechanical system signals as one testable procedure
  9. 2012Treat a packaged mechanical system as one inspectable procedure
  10. 2013Mechanical trading systems as complete signal procedures
  11. 2013Testable cycle rules as one procedure
  12. 2014Evaluate mechanical trading systems as one procedure
  13. 2015Mechanical trading systems as one testable procedure
  14. 2016Evaluating mechanical trading systems as testable procedures
  15. 2016Reading a systems catalog as one mechanical procedure
  16. 2018Mechanical systems as testable signal procedures
  17. 2019Treat mechanical system listings as specification audits
  18. 2019Match the automation stack to mechanical system constraints
  19. 2019Bar size as a mechanical system construction constraint
  20. 2020Interrogating mechanical system listings as one procedure
  21. 2020Mechanical systems still need emotion rules
  22. 2020Comfort, not theory, keeps mechanical rules in use
By fieldSystem design203 readingsBy year2019140 readings
All 322 readings tagged Mechanical trading system
Also on Mechanical trading system5 readings
1982A bounded-risk entry separates a forecast from a trend1984Evaluating mechanical systems beyond net profit1985Treat a shared mechanical printout as a public script1987Evaluating a black-box pyramiding routine with adverse excursion1987A mechanical rank-rotation sleeve for monthly fund leaders