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CAPITAL AND RISK MANAGEMENT FOR AUTOMATED TRADING SYSTEMS
Abstract and Figures
The most important part in the design and implementation process of automated trading systems in any financial investment company is the capital and risk management solution. Starting from the principle that the trading system must run fully automated, the design process gets several particular aspects. The global stop loss is a special approach for the risk management strategy that will ensures a positive expectancy in algorithmic trading. A case study based on an already optimized trading algorithm will be used to reveal how important the risk level optimization is, in order to improve the efficiency of the trading software. The main optimal criteria are as usual the profit maximization together with the minimization of the allocated risk, but these two requirements are not enough in this case. This paper will reveal an additional optimization criterion and the main directions to build a reliable solution for an automated capital and risk management procedure. Keywords: automated trading software (ATS), business intelligence systems (BIS), capital and risk management (CRM), algorithmic trading (AT), high frequency trading (HFT). (Available at: https://pauna.biz/Capital_and_Risk_Management)
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