Success Stories in Algorithmic Trading - we need more of them!
What did you once believe about algo-trading that you later found to be wrong?
Forum on trading, automated trading systems and testing trading strategies
Ryan L Johnson, 2026.10.13 23:02
The fact that the retail CFD/FX markets have the lowest barriers to entry in terms of trading capital, knowledge, and experience, doesn't mean that they are the easiest in which to profit. Quite the contrary. Consider the underlying model of those over-the-counter (OTC) markets. Each retail CFD/FX broker-dealer has its own contracted "liquidity provider(s)," it's own set of trading terms, a captive pool of retail traders, and takes the other side of those retail traders' positions. There are only so many hedge funds and investment banks, so they are "diversified" among many CFD/FX broker-dealers. Last time I checked, J.P Morgan accounted for about 40% of global FX trading volume. Those liquidity providers also maintain their own private backend connections to the wholesale interbank FX market─another layer of "diversification" of sorts. In contrast thereto, we the retailees are fractured up into "manageable chunks" for the broker-dealers/liquidity providers. Interestingly, this has never stopped anyone from claiming that the CFD/FX "market" (note the intentional omission of the "s" to make it appear singular) is the most liquid "market" in the world. For commercial participants, absolutely. For us in our respective pigeonholes, not so much.
For the average retail FX/CFD trader, there is also little to no equality in price discovery, contract volume access, trade execution priority, nor spreads as contrasted to commercial traders. Much, if not all, of this can be cured by trading on a centralized exchange such as the Chicago Mercantile Exchange (CME) where everyone has access to the same futures liquidity, instruments, price discovery, contract volume access, trade execution priority, and spreads. It's not rocket science but some additional learning is definitely required. The last thing that we'd want to do is be forced to take physical delivery of say, several thousand barrels of oil for having forgotten to close a position prior to LTD (last trading day). Detractors of trading centralized markets will sometimes say that the CME aggregates orders just like OTC broker-dealers do. Not really. There is a big difference between a central non-broker-dealer clearinghouse aggregating the orders of potentially all traders in compliance with exchange regulations versus a host of individual broker-dealers, each aggregating orders as each sees fit and pursuant to each's own "custom trading terms."
Finally, the CFD/FX price feeds are generally filled with noise as contrasted to a real futures market. One potential exception is a DMA (direct-[interbank] market-access) account which is rarely available to retail traders and even if it is, it requires tens of thousands of dollars (at least) to open an account. Real futures prices tend to swing more smoothly and run a bit further. We would be hard pressed to find a major difference between the front-month EURUSD futures contract and a DMA spot EURUSD pair in terms of price action but again, the average retailee will never see a DMA account. At the end of the day in CFD/FX trading, we get the OTC price, etc. that a broker-dealer decides to give us.
Full disclosure... I trade both, but real futures are more profitable.
Thanks Ryan, a solid answer.
Forum on trading, automated trading systems and testing trading strategies
Ryan L Johnson, 2026.10.16 16:14
Thank you for your kind words.
Alternatively, they can cut to the chase and switch to a broker-dealer that supports MT5 and CME Futures. A good place for a beginning futures trader to start is Micro 1OZ gold futures in the CME's subsidiary COMEX exchange. They were recently created to directly compete with OTC XAUUSD spot instruments. The 1OZ spread is generally 0.25, while the Mini MGC gold futures have a 0.1 spread. The lower trading capital required for 1OZ is basically the same as XAUUSD. Combined exchange/broker-dealer commissions are about 0.76 USD per side. Of course, bimonthly contract expirations apply to 1OZ but aside from positional (long-term) trading, who cares. They also settle in cash, so no one runs the risk of having to travel to the State of Oklahoma in in the U.S. to pick up physical gold at a missed expiration.
Interestingly, commercial traders are unlikely to touch 1OZ contracts due to higher proportional transaction costs when compared to MGC and GC (full size). To be clear, those are all separate instruments that trade independently of each other.
1OZ also trades 24/7 minus a few minutes (2 or 3) at each daily close. Personally, I wouldn't trade on the weekend. There's decent volume on Saturdays but the price action throughout the weekend is rather lame.
Forum on trading, automated trading systems and testing trading strategies
Ryan L Johnson, 2026.10.16 17:17
In my neck of the woods, a broker-dealer won't even add a CME Futures contract to its product offerings until volume and O/I hit the bigtime. For example, 1OZ Futures took a while for my broker-dealer to accept. In contrast thereto, GBPJPY might never be added.
The full current list of Micro CME Futures is at: https://www.cmegroup.com/markets/microsuite.html#products
As a side note, anyone having a look at the price action, volume, and O/I of CME Futures contracts will almost certainly kick currency pairs to the curb altogether (both spot FX and FX futures).Thanks Ryan. What was the hardest lesson for you before things started to work?
Learning to work methodically. That's why I emphasized the importance of market selection in my above posts. That is always step #1 now, and it is based on 100% research. My failure to research the overall structure and lack of regulation of the U.S. FX market in a pre U.S. Dodd-Frank Act environment was a big mistake... to the tune of losing 7000 USD. Step #2 is instrument selection. That is based on minimum tick size, tick value, contract size, margin(s) required, average volatility, liquidity (volume and O/I), and trading hours. Once I have all of that information, I move on to step #3 which is strategy development. I do not develop a strategy and then go on the hunt for something to trade─that is backward. My first subsidiary step within step #3 is removing noise from the instrument. This is based on the fact that it's difficult to discern anything useful from a chaotic mess─namely, traditional timeframes. I use uniform bars in a custom chart (usually Renko bricks) to determine the probabilities of multi-bar runs vs single bar reversals. Obviously, I'm looking to trade the multi-bar runs and avoid the single bar stop-outs. The ideal bar/brick size can be deduced programmatically or even manually. Manual calculations of potential P&L is rather straightforward where every bar is the same size. Many years ago, I worked it out on actual paper. And finally, I decide which indicator(s) to apply, if any. With ideal position management in place, the number of indicators used is usually one or none. Of course, if things don't work out to be potentially profitable, it's back to the start. Straightforward but laborious, you might say.
Costly lesson, but you turned it into a method. Thanks for the honest answer.
Coincidentally, my learning curve was about $7K as well.
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Algo-trading is tough. If you’ve been at it since the early 2000s like some of us, you know what I mean.
We all came for the same thing: the “money-making bomb”
-- one system
-- switch it on
-- forget the day job.
Then we spent years trying to crack the price. One by one, had to admit there is no miracle EA or strategy that works in every market. It doesn’t exist.
Nowadays Claude Code is galloping, Fable is shining - lots of fun, tons of power, doesn't change a thing.
Most never see the profits that got them excited on Day-1. Plenty give up. Many settle for some mediocre martingale or lot-size averaging. Many went academical, writing articles, recording videos, etc. I don’t blame anyone.
Struggling doesn’t necessarily mean you’re doing everything wrong:
-- sometimes progress takes years
-- sometimes you have to drop ideas you believed in
-- sometimes you realise your original expectations were simply unrealistic.
I’d like this thread to be about the real journey, not just the final results.
Have you found something that works for you? Overcome a problem that nearly made you quit? Or learned something the hard way that you wish you’d known years earlier? Small and slow is fine. You don’t have to be rich.
Not sure where to start? Pick one question below, skip the rest.
-- What did you once believe about algo-trading that you later found to be wrong?
-- What was the biggest setback on your journey, and what did you learn from it?
-- Do you watch your EA trade, or do you leave it alone?
Let me start first: after 22 years in markets, I’m still learning and still searching, with AI in recent years. “Slowpoke” as they say in the US.
What’s your story? If something you share helps someone keep going, it’s worth sharing.
FRIENDLY REMINDER: Self-promotion and 3rd-party promotion are prohibited.
FRIENDLY REMINDER-II: First-hand experiences only, please. Keep it real - share your own journey, not someone else's story.