I want to bring up a bit of a discussion on Automated Trading.
What is it?
It is the utilization of technology where all trade functionalities are done on behalf of the trader by a computer script.
My take on it… it’s pure brilliance.
Butyes, I know there are many traders out there who have been burnt. And that is because, like with any product on the marketplace, there is the good, bad, and the ugly.
Look, I really think we have to get real and know there is shiny stuff in all investments and business dealings, that is why we need to take responsibility to do our own due diligence and ensure the product is worthy.
What you need to focus for auto trading
Better still create your own trading plan and get a programmer to program the system's criteria. Then you will have a true understanding of the system and what exactly the robot should or should not be doing.
What I find interesting, is that people are burnt because they have the wrong expectations. In life, we are only ever disappointed or angry when our expectations are not met. Now I'm not saying the answer is to lower your expectations of things, of course, you need to shoot for the stars, but again you need to be level-headed and realistic.
When you understand that there are good and bad points to everything, you can then focus on how you can utilize things to your advantage.
Robots are programmed with mechanical trading systems. This means there must be specific criteria that need to be met prior to the robot following its pre-programmed instructions. There is no room for subjectivity with a mechanical system. It either fits the rules or it doesn’t.
Facilities and issues in automated trading
The advantage to a mechanical trading system is that it can be programmed so that a robot can monitor the market and take trades on your behalf – and in the forex market that runs 24hrs, this is incredible. I know I can't do that… I get hungry, tired, plus at times even hesitate and miss good entries to trades.
But if you were wanting to use a subjective style of analysis like the ‘Elliott Wave’ it is virtually impossible to program such criteria that are always changing into a robot. Well currently anyway.
So, if you understand the limitations and advantages, and how a robot can improve your trading, you can find unison. Robots not only remove a high degree of the emotional pressure created by the nature of trading itself but also the human error element with the usual position sizing calculations and platform navigation.
I suggest that you run robots on a demo account with no interruptions… e.g.; avoid the temptation to manually close out trades. This is because you can never know the true performance if you interrupt it.
Only once you are confident you understand what it is doing, put it onto a live account with very small position size.