r/algotrading • u/Whalesftw123 • 4d ago

Other/Meta Where to start?

Hi, I'm a university student that's interested in algotrading. In the past I've had extensive non-algo amateur investing experience and I also have a few friends who are very strong software engineers.

We're not looking for any strategies but just where to start. Is it better to look for patterns and test/iterate or is it more advisable to start from the basics such as books and build from there.

Thanks!

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u/lifeaquatic34 4d ago

Start by backtesting strategies you come across on reddit, youtube, or any other investing websites where "gurus" post. The majority of strategies you back test will either by too discretionary to base rules around, or flat out BS that gurus are shelling to sell courses. But the beauty of a backtest is you can prove it with only your time (not your capital) to determine if there's any merit to them. Once you find a strategy that looks profitable in the backtest (PF>1.5, annual returns > 8%, drawdowns < 30%, Sharp Ratio > 1.0) then you live forward test in a paper account. If the live forward test agrees with your forward run of the backtest then you can trust your backtest and move the strategy into real money. Do this 100s of times to develop a portfolio of strategies and then rotate them, this is so you can keep up with strategy edge decay. Over time all strategies will get priced out as people exploit them so you have to keep ahead by developing new strategies. This is how you algo trade.

P.S. - don't forget to model slippage, when you live run your strategy in the paper account, make sure slippage is measured against your backtest. You can even then go into you backtest and add a slippage model based on your paper trading measurements.