Tuesday, September 7, 2010

Manual Trading Versus Automated Trading

‘The goal of any automated system, other than obviously being profitable, is to minimize drawdowns during times when the market conditions are not favorable to system trading.” --- Dr John F. Clayburg.


Auto trading has become a popular way of making money on the markets. It offers great opportunities when it comes to forex trading. The future of auto trade looks spectacular. The idea of making money consistently without lifting your fingers is intriguing. Trillions of dollars are changing hands every hour under the auspices of trading robots.

But like manual traders, only 2% of all the trading robots can be safely used for trading accounts. No robot can survive the markets in the long run without sound money management. Most robots are worthless - just automatic trash, making money only to those selling them. Like manual trading, no robot is a Holy Grail – every winning robot has periods of losses. Marketers can tell you that you don’t need any experience to use a robot, and that you just need to install it on your account, and then go to sleep. What else do you expect them to say? Most people would like to reap where they have not sown. How many of us have the patience to demo-trade an EA for at least 2 months before attaching it to a real account? We just believe what marketers say and show us and go live with their EAs.

My research group has tested most celebrated EAs at the present. We discovered very few that are still surviving occasional losing streaks. Plus they don’t make great profits as their promoters say. I know that going after huge profits is the easiest way for one to look up one’s timetable to bankruptcy. Most auto systems just don’t survive loses. In most cases, EAs, especially scalping EAs, have worse expectancy. Therefore they cannot survive the markets in the long run – even with stunning accuracy. Why? The reason is that most of these EAs are designed by programmers; not real market speculators.

As regards the place of auto trading on the markets, it is an ideal and practical way of making money. Opinion on this issue is not unanimous. Successful manual traders (many people made millions manually before the advent of trading robots) don’t see it as a substitute to their trading skills, judgment calls and discretion. The geeks, who would make it omnipotent, arouse antagonism by their aggressive marketing and preposterous fallacies. But its importance cannot be over-emphasized. Auto trading has come to stay; it has a great potential, but so are determined manual traders. It has many abilities and can raid the markets with adept alacrity, beavering away as programmed; though its intelligence is limited by programming. When it comes to being unemotional, auto trading seems superior, but so are many disciplined manual traders. The most baffling problems in trading are risk-related and psychological rather than automatic. New robots and innovative programming features are useless unless their risk management parameters can make them survive terrible market conditions. The majority of robots manufacturers know within themselves that robots cannot solve the all the problems associated with trading.


1 comment:

  1. Secrets of ETF trading that experts will never share
    what is a roboadvisor
    Recently, the robo advisor is becoming famous among the investor. It provides them the chance to use the automated trading strategies for their own benefit.


The default minimum deposit amounts are: $100 for Micro accounts, $500 for Pro-Managed accounts, and $2,000 for Pro accounts However, an optional "suggested deposit amount" parameter may be used.