Revolutionizing retail FX – We go into great detail on algo trading, AI and bots as brokers and traders need to turn a new page

These days, so many very complex factors are critical when it comes to ensuring longevity and sustainability among retail FX brokerages as traders have become increasingly knowledgeable and demanding, margins are at an all time low and diversification of asset class and value proposition are continually on the minds of our industry leaders as the regulatory, technological and financial aspects of the business continue to change.

Democratization of trading in OTC markets has become a focus, however in order to achieve that, it takes a specific set of skills and experience.

Today, FinanceFeeds discussed this at length with Mikael Breinholst, CEO of Tradeworks, which is an FX algo trading and automation technology company.

We were also joined by George Agathangelou, Business Development EMEA at Tradeworks and began to discuss the main points during Mr. Breinholst and Mr. Agathangelou’s several years in the FX industry – Mr. Breinholst is a senior Saxo Bank alumnus and Mr. Agathangelou has substantial experience in both proprietary trading and retail FX among some of Cyprus’ largest firms.

This combination of experience led these executives to look for the tool that truly democratizes algo trading.

Mr. Agathangelou said “I have grown frustrated with the “big boy’s toys” and have been looking for a place where we can combine our business development skills and interests with a true purpose of helping traders realise their goals through powerful – yet easy enough to actually use by those without programming skills. Myself, along with many others at the company actually trade real money as proprietary traders to profit, however it is vital to uses these skills to stay sharp on the markets and recognize the needs of retail traders.”

FinanceFeeds then engaged in a very interesting conversation and interview with Tradeworks’ senior management, Mssrs. Breinholst and Agathangelou detailing the method by which algo and automated trading will be conducted in the future, and what Tradeworks’ part in this will be.

With regard to algorithmic trading and the technology that facilitates it, do you think that artificial intelligence (AI), automated bots in high frequency environments will increasingly be used alongside human analysts in the FX world, just as they are in futures and exchange listed derivatives at the moment?

Yes, I do believe that algorithmic trading will have an exponential growth especially among retail traders as cloud computing now allows the opportunity for everyday people to have similar tools to those used by institutional traders. Technology has become better, cheaper and more efficient than any human, as it is impossible to match the high frequency execution or decision making speed of algorithmic trading robots. Instead of simply crunching numbers, the machines are now deciding and executing trades for us in the same way they are intended to be driving us home and cook or clean for us.

Just as in the world of stocks and futures, algo traders need to be a quant or mathematician and that’s why its out of scope of the everyday man. How does Tradeworks mobilize this type of technology in a way that it suits retail traders, and is within the scope of retail brokerages?

Tradeworks has a simple mission to make traders life easier whether they are beginners or experienced. Retail traders will find it most valuable because they can eliminate their emotions when trading and learn the steps towards developing a trading strategy. More experienced traders will see tremendous value as to the simplicity of setting up the strategy instead of having to program the strategy and setup a Virtual Private Server to host the strategy. If you are using a strategy to trade and can explain the logic behind it, then you can easily design it via a web interface and have it trading for you around the clock and while you sleep.

In terms of the automation of trading, we are well past the social trading revolution era, and Expert Advisors (EAs) are a distant image in the rear view mirror, yet full automation is vital for traders wanting to gain an edge in terms of maximizing all opportunities at all times. How should a modern day automation system advance the cause of zero-touch trading?

Today, DMA is often combined with algorithmic trading giving access to many different trading strategies. A modern automation system should certainly increase trading flows based on these strategies. And the type and quality of the flow it will generate will be quite favorable and can easily be handled by any A or B book broker. In theory, we see that no trading system will profitably beat the market forever, hence, a full, zero-touch, trading system has to be easier to develop than today, as the trader has to expect that is has to either change over time or be replaced by another system better handled to cope with changing market conditions. What we should expect is this type of technology will enable automated retail flow to provide additional liquidity in the markets and further reduce bid-ask spreads as markets become increasing competitive and automated.

Creating strategies is of great importance. How do you consider the backtesting environment to have to be structured in order that algorithmic traders can test their strategies against big data and previous trading environments to refine it for the live environment?

Backtesting can be a daunting and time consuming task on the quest for the perfect trading strategy so in a perfect world it should be thoroughly accurate, extremely fast, and allow you to simulate your various strategies in an environment as close to reality considering spreads, rollovers and commissions. Each strategy’s performance should be reviewed separately and in real time as market conditions continually evolve. Access to good historical data is also crucial because if you are backtesting with rubbish data then nothing good will come out of that . The reality of backtesting is that it is the best tool to test for faulty strategies, however, when using it as a tool to optimize the expected performance of a strategy, traders should expect that high quality backtests also take more than seconds to complete.

How should the internal component of a fully automated trading system operate, and should there be quants, algo specialists and programmers continually supporting the system as it trades a live environment, and if so, how can this be capitalized by retail traders?

Robust infrastructure is essential as well as the people maintaining and supervising the trading systems at all times, this ensures the uninterrupted continuity of the trading activity and the efficiency of retail trading venues. But with the tools coming to market addressing the needs of retail traders, such as Tradeworks, with modern, visual interfaces, there is less need for programmers and quants writing your trading strategies. Even traders that are new to automated trading can build good strategies and with access to communities they are able to advance their skills in designing even better strategies.

Do you envisage the automation of trading in the retail FX industry eventually emulating that of the proprietary trading desks of Chicago and New York, and if so, how can that occur whilst ensuring that the brokers can still remain within profit, and retail traders can afford the resources?

The technological gap between retail FX and the proprietary trading desks will certainly narrow, there is no doubt about that. In the same way that PCs were once the size of a house and now can fit in our pocket, powerful trading tools that used to be limited to the prop trading desks will be within retail traders’ hands. Retail brokers can remain within profit if they provide value to the market place by being competitive and at the same time lower their costs, address their customers’ needs and mitigate their risks whether these are financial, compliance or operational. Retail traders will be able to address the resources because cloud computing has lead to a significant cost saving as it drastically reduces the operations and maintenance cost of IT infrastructures, therefore making this technology available for anyone interested in trading.

What does Tradeworks have in store for 2017?

Tradeworks is adhering to its mission of democratising access to advanced trading technology by expanding our efforts of helping non-programmers access algorithmic trading strategies. As an example, we have just released our first chart inside Tradeworks and also recently launched support for a number of custom indicators. Shortly we will also be providing the first version of a template market. In 2017 we will continue to support more complex strategies but never under the expense of sacrificing usability – actually to the contrary. Finally, we are expanding our physical presence on top of our existing offices in Copenhagen, Denmark and Singapore, beginning with an office in Cyprus.