Thanks in advance for your answers. I am trying to setup a trading system. The general idea is to identify a context on a higher time frame and then use a series of indicators, price and volume mainly to identify entry points. There are different scenarios I have identified, and each time a scenario is triggered, a specific strategy is being used. However, I have a problem to set conditions for the robot not to trade when for example ADX < 20. With this strict condition, one can miss a good entry point, because often a trend if there is one, will start under the 20 level line. And how do you tackle this issue, are there other conditions used to trigger the no trade period.
That's the main drawback of automated trading - takes 'feel' out of the equation by being purely quantitative (discretionary trading can add the 'human touch' of qualitative reasoning to decision making).
You could adjust the execution parameters to be a bit more lenient & thus capture more "setups", at the risk of getting more bad trades of course.
Or, you could use some mathematical method to calculate volatility/general activity levels in the market, probably derived from a relationship between volume, price movement, and time.
Kevin Davies is an expert at automated trading, he posts here too - so you may check into some of the wisdom he shares about creating your own ATS. I know he's put up a few webinars/etc that address this very question.
Trading rules are as per what they mean literally. Either the rule is to be followed or disregarded completely.
You could adjust the threshold settings of the rule to analyse if the performance against various settings. Maybe even flip the rule around and see what happens! You might uncover more insights to isolate the truly important rules to trade and drop all the other unnecessary ones.
What you're trying to do is programatically do-able. You just have to know how to do it or hire somebody that does. The hardest part is defining hard, set-in-stone rules that must be followed 100% of the time that are going to work for you instead of trying to develop and depend on a Yoda-like feel for the market.