How to use Composer and TradingView to potentially enhance your portfolio

On May 11, 1997, an IBM supercomputer called Deep Blue beat the world chess champion, Garry Kasparov, after a six-game match. The event drew international news coverage and ushered in a new era of computer intelligence. Computers had finally outmaneuvered humans.

So you would assume by 2023 all financial trading is fully automated by supercomputers, right?

Well no.

The most sophisticated trading outfits in the world combine human intelligence and computing power. This dual approach is essential because each analytical system, the brain and computer models, has strengths and weaknesses. Computer models are useful simplifications of the real world and can make sense of huge datasets quickly. Human brains, on the other hand, are adept at solving problems that are poorly specified and addressing never-before-seen effects. Financial markets are complex, unpredictable systems, and investors need computer models and human ingenuity to succeed.

Savvy investors use powerful tools to get the best of both worlds. In my conversations with investors, I’ve found that many traders are using TradingView alongside Composer to supercharge their portfolios. With TradingView, investors get all the inputs and analytical tools to identify patterns, make sense of new information, and visualize trading strategies. Composer lets investors build a model, test its effectiveness, and then automate trading by acting on thousands of data points of real-time market data.

How to use Composer and TradingView to upgrade your portfolio

Here are 4 ways traders are using Composer and TradingView together to develop unique algorithmic investment strategies.

Generate new ideas

When designing a trading strategy, where should investors start? Strategies often begin with a classic thesis like Momentum, Trend Following, or combining complementary assets (e.g., stocks and bonds). Those strategies are easy to set up in Composer, but how do investors add their own spin or identify entry and exit points?

Power users on Composer are visualizing ETFs and technical indicators on TradingView to source new ideas for their automated investment strategies. Visualizing the data can help answer questions like:

• How does SPY behave when it crosses its 200-day moving average?
• How does a 200-day moving average behave differently than a 100-day one?
• Do volatility-linked ETFs signal changes in the S&P 500?
• How are classic relationships holding up in the current market?

Implement, test, and refine strategies

Is your strategy any good? Investors are backtesting their strategies on Composer to understand potential performance and risk. The best way to assess whether a strategy is worth investing in is to run it live for a test period. The second best way is to backtest it on historical data. Composer provides backtested risk, return, and trading costs metrics for models, allowing investors to quickly test their ideas and refine the logic. Quickly assess how a strategy would change if you:

• Tried a new ETF. Swap in SPY for QQQ or build a value tilt into the portfolio
• Changed the logic parameters. What if you used a 100-day moving average instead of 200-day? What if you looked at RSI as a momentum indicator instead of a cumulative return?
• Adjusted the trading frequency to be more responsive or less responsive. What happens to trading costs and returns? Can you get away with trading less frequently?
• Combined multiple strategies into a single meta-strategy.
• Changed weights for ETFs or sub-strategies.

The process of developing a profitable trading strategy is iterative and circular. Professional traders often start with an idea that they want to test before building a model. The process of simplifying the idea into a model provides feedback and creates more questions to answer. This iteration continues with each step helping refine the investment strategy.

Now retail investors can build iteratively and refine strategies with Composer and TradingView.

Incorporate New Information

The Federal Reserve raises interest rates by more than expected. Congress passes legislation that impacts the semiconductor industry. AAPL gets sued by the European Union. Breaking news can move markets and alter future expectations.

Investors need to weigh the impact of new information on their models, relying on their knowledge of financial markets to update their expectations. Investors use TradingView to identify previous events that may be similar and can dig into the aftermath to assess whether a change is needed to their model.

Jump over to Composer and test those changes before going live with the updates. With a click of a button, the updated model is live.

Automate Trading

Systematic trading strategies require calculating hundreds of metrics for thousands of stocks and bonds to make buy and sell decisions. Composer’s automated investment models, called symphonies, calculate these metrics using real-time data and automatically executes trades when the model triggers a change. No more rushing to trade, setting phone reminders, or keeping track of time zones.

After you’ve done the hard work visualizing trades in TradingView and building the strategy on Composer, sit back and let the algorithm put your thinking to work.