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Version: Next 🚧

Build Your First Algorithm in 10 Minutes

In this tutorial, you'll create a simple moving average crossover strategy from scratch. This is perfect for beginners and takes about 10 minutes to complete.

What You'll Build​

A momentum strategy that:

  • Buys when a fast moving average (20-period) crosses above a slow moving average (50-period)
  • Sells when the fast MA crosses below the slow MA
  • Uses 2% of capital per trade
  • Sets a 2% stop loss and 4% take profit (1:2 risk-reward)
  • Trades NSE:RELIANCE on a 15-minute timeframe

Prerequisites​

  • An x3Algo account (sign up at x3algo.com)
  • Basic understanding of moving averages (optional but helpful)

Step 1: Create New Algorithm​

  1. Log in to your x3Algo dashboard
  2. Navigate to Algorithms in the sidebar
  3. Click the Create Algorithm button
  4. You'll see a 5-step wizard

Step 2: Configure Basic Information​

Fill in the basic details:

Strategy Name​

My First MA Crossover

Description​

Simple moving average crossover strategy for learning purposes

Strategy Type​

Select Momentum from the dropdown. Momentum strategies capitalize on trending markets.

Timeframe​

Select 15m (15 minutes). This means:

  • Your algorithm checks for signals every 15 minutes
  • Each candle represents 15 minutes of price action
  • Good balance between signal frequency and noise reduction

Trading Symbols​

Enter:

NSE:RELIANCE
Symbol Format

Always use the format EXCHANGE:SYMBOL:

  • NSE: National Stock Exchange (Indian equities)
  • BSE: Bombay Stock Exchange
  • MCX: Multi Commodity Exchange
  • NCDEX: National Commodity & Derivatives Exchange

Examples: NSE:TCS, MCX:GOLD, BSE:SENSEX

Click Next to proceed to Step 2.

Step 3: Configure Position Sizing​

Position sizing determines how much capital to risk per trade.

Method​

Select Percentage-based from the dropdown.

Percentage​

Enter:

2

This means each trade will use 2% of your available capital.

Why 2%?
  • Conservative: Protects your capital from large losses
  • Sustainable: Allows for 50 consecutive losses before account depletion
  • Professional: Used by many institutional traders
  • Flexible: Automatically adjusts as your account grows

For beginners, never risk more than 2-3% per trade.

Example Calculation​

  • Account balance: ₹100,000
  • Position size: 2% = ₹2,000
  • If RELIANCE is trading at ₹2,000/share
  • Quantity: ₹2,000 / ₹2,000 = 1 share

Click Next to proceed to Step 3.

Step 4: Configure Entry Conditions​

Entry conditions define when to open a position.

Position Type​

Select Both (allows both long and short positions).

Logical Operator​

Select AND (all conditions must be true).

Add First Condition​

Click Add Condition and configure:

For Long Entry (Buy Signal):

  • Type: Indicator vs Indicator
  • Indicator 1: SMA (Simple Moving Average)
  • Period 1: 20
  • Operator: crosses above
  • Indicator 2: SMA
  • Period 2: 50

This creates a buy signal when the 20-period SMA crosses above the 50-period SMA (bullish crossover).

Confirmation Candles​

Set to:

1

This waits for 1 candle to confirm the signal, reducing false signals.

Understanding Confirmation
  • 0 candles: Enter immediately (more signals, more false positives)
  • 1-2 candles: Balanced approach (recommended for beginners)
  • 3+ candles: Very conservative (fewer signals, higher quality)

Time Filters (Optional)​

For now, leave this empty to trade all day. You can add time filters later to trade only during specific hours.

Click Next to proceed to Step 4.

Step 5: Configure Exit Conditions​

Exit conditions protect your profits and limit losses.

Stop Loss​

Click Configure Stop Loss:

  • Type: Percentage
  • Percentage: 2

This exits the trade if price moves 2% against you.

Example:

  • Entry price: ₹2,000
  • Stop loss: ₹2,000 × (1 - 0.02) = ₹1,960
  • Maximum loss: ₹40 per share

Take Profit​

Click Configure Take Profit:

  • Type: Risk-Reward Ratio
  • Ratio: 2

This automatically calculates take profit at 2× your stop loss distance.

Example:

  • Entry price: ₹2,000
  • Stop loss distance: 2% = ₹40
  • Take profit distance: 2 × ₹40 = ₹80
  • Take profit price: ₹2,000 + ₹80 = ₹2,080
  • Risk-reward: Risk ₹40 to make ₹80 (1:2 ratio)
Risk-Reward Ratios
  • 1:1: Break even with 50% win rate
  • 1:2: Profitable with 34% win rate (recommended minimum)
  • 1:3: Profitable with 26% win rate (aggressive)

Always aim for at least 1:2 risk-reward ratio.

Exit on Opposite Signal​

Enable this option:

  • ☑️ Exit on opposite signal
  • ☑️ Close immediately

This exits long positions when a short signal appears (and vice versa).

Click Next to proceed to Step 5.

Step 6: Configure Risk Parameters​

Risk parameters provide portfolio-level protection.

Maximum Position Size​

Enter:

10

This limits any single position to 10% of your capital, preventing over-concentration.

Maximum Daily Loss​

Enter:

5

This is your circuit breaker. If you lose 5% of your account in a single day, the algorithm automatically pauses.

Example:

  • Account: ₹100,000
  • Daily loss limit: 5% = ₹5,000
  • After losing ₹5,000 in one day, algorithm stops trading
  • Prevents emotional revenge trading
  • Protects capital during adverse market conditions

Maximum Open Positions​

Enter:

3

This limits how many trades can run simultaneously, controlling overall exposure.

Risk-Reward Ratio​

Enter:

2

This enforces a minimum 1:2 risk-reward ratio on all trades.

Click Complete to finish configuration.

Step 7: Test in Paper Mode​

Before risking real money, test your algorithm with paper trading.

  1. Your algorithm is now in Stopped state
  2. Click the Settings icon next to your algorithm
  3. Under Execution Mode, select Paper Trading
  4. Click Save
  5. Click the Start button to activate your algorithm
Paper Trading Benefits
  • Uses real market data
  • No real money at risk
  • Tests your strategy logic
  • Builds confidence before going live
  • Identifies issues early

Run paper trading for at least 2-4 weeks before going live.

Step 8: Monitor Your Algorithm​

View Dashboard​

Navigate to the Dashboard to see:

  • Active algorithms
  • Open positions
  • Recent trades
  • Performance metrics

Check Signals​

Go to Signals to see:

  • When entry conditions were met
  • Why signals were generated
  • Which conditions triggered

Review Trades​

Go to Trades to analyze:

  • Entry and exit prices
  • Profit/loss per trade
  • Win rate
  • Average profit vs average loss

Understanding the Results​

After running for a few days, you'll see metrics like:

Win Rate​

Win Rate: 45%

Percentage of profitable trades. For a 1:2 risk-reward strategy, 45% is profitable.

Profit Factor​

Profit Factor: 1.8

Ratio of gross profit to gross loss. Above 1.5 is good, above 2.0 is excellent.

Total Trades​

Total Trades: 12

Number of trades executed. Need at least 30-50 trades for statistical significance.

Total Profit/Loss​

Total P&L: +₹2,450 (+2.45%)

Net profit or loss from all trades.

Common Issues and Solutions​

No Signals Generated​

Problem: Algorithm is running but not generating any signals.

Solutions:

  1. Check if market is open (NSE: 9:15 AM - 3:30 PM IST)
  2. Verify symbol is correct: NSE:RELIANCE
  3. Ensure algorithm status is Active (not Stopped or Paused)
  4. Check if moving averages have crossed recently (may take time)

Too Many Signals​

Problem: Getting too many entry signals.

Solutions:

  1. Increase confirmation candles from 1 to 2-3
  2. Add additional filters (RSI, volume, trend confirmation)
  3. Use a longer timeframe (30m or 1h instead of 15m)

Losses Exceeding Expectations​

Problem: Losing more than expected.

Solutions:

  1. Verify stop loss is configured correctly (2%)
  2. Check if slippage is high (use limit orders)
  3. Ensure risk-reward ratio is at least 1:2
  4. Review if market conditions suit your strategy (trending vs ranging)

Next Steps​

Congratulations! You've created your first trading algorithm. Here's what to do next:

1. Run Backtests​

Test your strategy against historical data:

  • Go to Backtests
  • Click New Backtest
  • Select your algorithm
  • Choose date range (last 6-12 months)
  • Review performance metrics

Learn more: Backtesting Basics

2. Optimize Parameters​

Experiment with different settings:

  • Try different MA periods (10/30, 50/200)
  • Test various timeframes (5m, 30m, 1h)
  • Adjust risk-reward ratios (1:2, 1:3)

Learn more: Strategy Optimization

3. Add Complexity​

Enhance your strategy:

  • Add RSI filter to avoid overbought/oversold entries
  • Include volume confirmation
  • Implement trailing stops

Learn more: EMA Crossover Strategy

4. Go Live​

When ready to trade with real money:

  • Run paper trading for 2-4 weeks minimum
  • Verify consistent profitability
  • Start with small position sizes
  • Monitor closely for first week

Learn more: Paper to Live Transition

Summary​

You've learned how to:

  • ✅ Create a new algorithm from scratch
  • ✅ Configure all 5 steps (basic info, position sizing, entry, exit, risk)
  • ✅ Test in paper mode
  • ✅ Monitor performance
  • ✅ Troubleshoot common issues

Key Takeaways:

  • Start simple (moving average crossover is a great first strategy)
  • Use proper position sizing (2% per trade)
  • Always set stop losses (2% maximum loss)
  • Aim for favorable risk-reward (minimum 1:2)
  • Test thoroughly before going live (paper trading for 2-4 weeks)

Ready to build more sophisticated strategies? Check out the EMA Crossover Strategy tutorial next!

Last updated on by Admin