Getting Started

This guide introduces the algorithm builder and the workflow for creating a first trading algorithm.

What is the Algorithm Builder?

The x3Algo Algorithm Builder organizes strategy rules, backtesting, risk settings, and execution settings into a structured configuration workflow.

The 5-Step Algorithm Creation Process

Creating a trading algorithm in x3Algo follows a simple 5-step process:

graph LR
    A[1. Basic Info] --> B[2. Position Sizing]
    B --> C[3. Entry Conditions]
    C --> D[4. Exit Conditions]
    D --> E[5. Risk Parameters]
    E --> F[Complete & Deploy]

Step 1: Basic Information

Define your strategy's foundation:

• Strategy Type: Choose from scalping, swing, position, momentum, mean reversion, arbitrage, or market making
• Timeframe: Select execution frequency (1m, 5m, 15m, 30m, 1h, 4h, 1d, 1w)
• Trading Symbols: Specify which instruments to trade (e.g., NSE:RELIANCE, MCX:CRUDEOIL)
• Name & Description: Give your algorithm a meaningful name

Step 2: Position Sizing

Determine how much capital to allocate per trade:

• Percentage-based: Risk a fixed percentage of your capital (1-5% recommended)
• Fixed quantity: Trade a consistent number of shares/contracts
• Risk-based: Calculate position size based on stop loss distance
• Volatility-adjusted: Use ATR to adapt to market conditions
• Kelly Criterion: Optimize position size based on win rate and profit factor

Step 3: Entry Conditions

Define when to open positions:

• Indicator comparisons: Use technical indicators (SMA, EMA, RSI, MACD, Bollinger Bands)
• Price patterns: Detect candlestick patterns (hammer, engulfing, doji)
• Logical operators: Combine multiple conditions with AND/OR logic
• Confirmation candles: Wait for signal confirmation (0-10 candles)
• Time filters: Trade only during specific hours or days

Step 4: Exit Conditions

Protect profits and limit losses:

• Stop Loss: Fixed, percentage, ATR-based, or indicator-based
• Take Profit: Fixed, percentage, risk-reward ratio, or multiple targets
• Trailing Stops: Lock in profits as price moves in your favor
• Partial Exits: Scale out at different profit levels
• Time-based exits: Close positions after a maximum hold time

Step 5: Risk Parameters

Set portfolio-level risk controls:

• Maximum position size: Limit exposure per trade (2-10% of capital)
• Daily loss limit: Circuit breaker to pause trading after losses (1-5% of account)
• Maximum open positions: Control how many trades run simultaneously (3-10)
• Risk-reward ratio: Ensure favorable profit potential (minimum 1:2)

Algorithm Lifecycle States

Your algorithm moves through different states during its lifecycle:

stateDiagram-v2
    [*] --> Draft: Create
    Draft --> Stopped: Complete
    Stopped --> Active: Start
    Active --> Paused: Pause
    Paused --> Active: Resume
    Active --> Stopped: Stop
    Stopped --> Archived: Archive
    Active --> Error: Error
    Error --> Stopped: Fix & Restart

State Descriptions

• Draft: Algorithm is being configured, validation is relaxed
• Stopped: Configuration is complete but algorithm is not running
• Active: Algorithm is running and can generate signals
• Paused: Temporarily suspended, can be resumed quickly
• Error: Encountered an issue, requires attention
• Archived: Soft-deleted, preserved for historical reference

Complete Working Example

Here's a simple moving average crossover strategy you can copy and test immediately:

{
  "name": "Simple MA Crossover",
  "description": "Buy when fast MA crosses above slow MA, sell on opposite",
  "strategyType": "momentum",
  "timeframe": "15m",
  "symbols": ["NSE:RELIANCE"],

  "positionSizing": {
    "method": "percentage",
    "percentage": 2
  },

  "entryConditions": {
    "positionType": "both",
    "logicalOperator": "AND",
    "conditions": [
      {
        "type": "indicator_indicator",
        "indicator1": "SMA",
        "period1": 20,
        "indicator2": "SMA",
        "period2": 50,
        "operator": "crosses_above"
      }
    ]
  },

  "exitConditions": {
    "stopLoss": {
      "type": "percentage",
      "percentage": 2
    },
    "takeProfit": {
      "type": "risk_reward",
      "ratio": 2
    }
  },

  "riskParameters": {
    "maxPositionSize": 10,
    "maxDailyLoss": 5,
    "maxOpenPositions": 3
  }
}

Glossary of Key Terms

• Algorithm: A set of rules that automatically executes trades based on market conditions
• Backtesting: Testing a strategy against historical data to evaluate performance
• Paper Trading: Simulated trading with real market data but no real money
• Live Trading: Executing real trades with actual capital through broker integration
• Position Sizing: Method for determining how much capital to allocate per trade
• Entry Condition: Rule that must be satisfied to open a new position
• Exit Condition: Rule that triggers closing an open position
• Stop Loss: Automatic exit to limit losses if price moves against you
• Take Profit: Automatic exit to lock in gains at a target price
• Trailing Stop: Stop loss that moves with price to protect profits
• Risk-Reward Ratio: Relationship between potential profit and potential loss (e.g., 1:2 means risk $1 to make $2)
• Drawdown: Peak-to-trough decline in account value
• Win Rate: Percentage of profitable trades
• Profit Factor: Ratio of gross profit to gross loss (>1.5 is good)

Next Steps

Now that you understand the basics, choose your learning path:

For Beginners

1. Build Your First Algorithm in 10 Minutes - Step-by-step guide for complete beginners
2. Backtesting Basics - Learn to validate your strategy
3. Paper to Live Trading Transition - Go live safely

For Intermediate Traders

1. EMA Crossover Strategy - Build a trend-following system
2. RSI Divergence Strategy - Implement reversal detection
3. Multi-Timeframe Strategy - Add higher timeframe confirmation

For Advanced Users

1. Strategy Optimization Walkthrough - Optimize parameters and avoid overfitting
2. How-To Guides - Task-oriented guides for specific features
3. API Reference - Programmatic algorithm management

Getting Help

• Documentation: Browse How-To Guides for specific tasks
• Troubleshooting: Check common issues and solutions
• Support: Email contact@x3algo.com for assistance

Ready to build your first algorithm? Let's get started with the 10-minute tutorial!