Grid and Pac Man Programs

Another interesting and less esoteric direction in FOREX automated trading are grid and Pac Man programs.

Between the resurgence of artificial intelligence at one end and the continued frenzy of HF and UHF trading at the other end, a new trading paradigm is emerging. Grid systems trade both sides of a market, scaling in-and-out of a trade as the markets work up-and-down in a band. Thus, a grid always has a hedged position in a pair and can, consequently, make a profit on both sides of it. Pac Man programs take grids to a higher level, predefining a very specific type of market behavior of directional movement and volatility -- and striking only when the markets enter such territory.

When they do, the program executes a hedge order -- both buying and selling similar to a standard grid.

As the market weaves its way through the defined space, it attempts to gobble profits on both the long and short side. Watch for the emergence of complex Pac Man programs using artificial intelligence or nonlinear methods to define the price-time space for trading. A recent entry showing great promise uses speed and range instead of directional movement and volatility. similar to the ME elements of directional movement and volatility. See Figure below.

[caption id="attachment_13348" align="aligncenter" width="550"]The Pac Man Paradigm The Pac Man Paradigm[/caption]

By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

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