Over the last 5 decades, algorithmic trading has come a far way. Started out as mathematical models shared among economists and quantitative financial specialists, these models were very rudimentary but at the time there was never a question about the ineffectiveness of these models.
Mathematician and billionaire hedge fund manager Jim Simons proved that financial data could be quantified and mined for patterns not seen with the naked eye.
This methodology even though seemed rudimentary at the time with basic computer models due to the constraints such as computing resources, mathematical concepts, data, and various other factors still propelled Renaissance Technologies into one of the most profitable hedge funds over the years.
Ray Dalio who is the founder of Bridgewater Associates which is an investment management company, often time states that he extensively uses algorithmic investment systems to quantify all the information available.
Today if you look across the landscape of most international hedge funds, they have some form of an algorithmic automated system that helps them to quantify information. The problem is that these technologies are not easily accessible and not everyone can easily hire “quants” because these are highly skilled and niche individuals.
Despite that inconvenience, due to the dispersion of technological tools, it has become easier for an individual who is a self-starter to learn various computer programming tools such as C++, Python, C, etc.
These tools can enable them to create and test their own algorithmic trading systems. That’s why over the years you can easily download a trading robot over the internet or hire an individual to create it which will enable you to do automated trading.
This has shortened the gap between an individual and a hedge fund somewhat but we are still not there yet.
Composer
Composer is trying to create a bridge that is even closer. Composer is an app that will allow you to leverage algorithmic trading systems that mimic top hedge funds. Canadian Co-founder Benjamin Paul Robert created Composer to do just that.
Composer is approximately 3 years old and they have exceeded a trading volume of $100 million USD. Over 150,000 orders have been made on the platform and over 500,000 backtests were ran on the platform.
Backtesting is basically testing trading strategies on past data to see how best that strategy can be able to predict market movements and that extrapolate that on future data.
On this platform you also look at different strategies and view the overall market performance of such a strategy, this level of transparency is great because not every strategy is going to work.
They also give you the opportunity to edit these strategies in order for you to bring your own signature into each strategy. Additionally, the editor that provides such a feature is no-code so you don’t have to worry about reading complex algorithms.
You can also share strategies with others if that is what you want. Composer is a very interesting technology that has an audience and will continue to bring persons with no investment experience onto the platform.
The simplicity of creating a system and seeing it run does make it feel like you have a mini hedge fund running on your computer. It’s a small step but a very important step to bring algorithmic trading abilities to our fingertips.
