The Algo Education Continues. Let's talk more about the Master Algorithm (MA).

06 Jun 2023, 10:09

🤝 The Algo Education Continues 🤝 Let’s talk more about the Master Algorithm (MA). An essential feature of the strategy is that within larger funds, accounts are subdivided. The MA launches a remote instance of itself into a Virtual Private Machine "VPM" that governs the trades of an individual sub-account. Each VPM is desynchronised from the MA and all other VPMs on that account. Without this desynchronisation, every VPM would make identical calculations and attempt to enter the same trades simultaneously, thus creating bottlenecks and potential temporary liquidity issues. Also, as each VPM is viewing the data upon which it bases its calculations by looking at different information, a simple example may be that one VPM will use a 30-minute chart, whilst another may be using a 4-hour chart. Different VPMs will see different entry points. Consequently, one VPM may choose to BUY a currency pair when other VPMs choose to SELL. Both can make profits as they close at different times, but the critical advantage of desynchronisation is that the VPMs automatically begin hedging themselves. Returns are smoothed, and drawdown is reduced. The larger the account, the greater the number of sub-accounts and the more significant the reduction in exposure to individual currencies. However, an important feature that is a consequence of the multiple sub-systems operating in parallel but independently is that it can adapt to follow trends and also retracements. If the data indicates a stronger movement, it will intensify trading and follow the trend while moving the T/P (create a trailing T/P) to bank larger profits – until the system identifies signs of weakening movement or ranging market and stops trailing. Then it will return to the standard behaviour unless a strong trend is identified again, which will restart trailing.