If you’ve been in the trading scene for some time, you would have no doubt come across some automated trade system information. Resist the urge to dive into one right away. You need a clear idea of what it is first and if it’s good for you.
There are two different perspectives when it comes to defining what automated systems for trading are. Many seasoned traders tend to use the term to mean tools, products and services that can automate an element, factor or function in their trading system. A clear example of this is stop loss orders. Experienced traders normally want to get a hold of brokerage services that can instantly execute pre defined stop loss instructions when there is a need to do so.
From the viewpoint of an expert investor, selected auto features in a service or tool are essential. In the example given, traders no longer need to call their brokers with an auto stop loss option enabled. In a sense this still fits the expert definition of what an automatic trading system is.
A number of other traders tend to think in different lines. What they mean by automation is a stock, forex or options trading system, plan or package that can run completely on its own after the initial set-up process has been completed. In short, they don’t really want to spend a lot of time and effort toiling on data interpretation and analysis. They want a tool or program to do all the work for them and they just have to wait for results.
The second definition deserves closer scrutiny. In the first place, you should want to know if this even actually exists. The truth of the matter is that there really are some software packages that give investors this impression of complete automation. In some circles they are called black box systems.
To be more exact, systems that are under the black box category give users trade suggestions based on pre defined elements given to them. These aren’t the best products to go for since there is no existing automated trading system that can do better than real people when it comes to analyzing trades. When you get a suggestion from a program, there is no clear explanation on how these recommendations were reached and you are left with no idea with regards to reliability.
What’s more, anything black box is most likely so rigid that it rules out individuality. Be mindful that investors don’t share the same risk level tolerance, psychology and trading style. This implies that a rigid structure won’t be good for every single person. Trading systems are most effective when they are made to fit individuals. You need to follow a custom plan if you want to avoid losses you can’t endure.
In effect, a trade system is ideally suited to you if it has been freshly constructed with your unique personality and preferences in consideration. If you find it too difficult to make something out of nothing to begin with, you can always take the next best step which is to take a plan made by someone else and modify it.
Obviously, a totally automatic stock or forex trading system does not have your best interests at heart. You will never come across a program that can make perfect selections for you. If you’re really interested in automation, pick a program or tool that can partially address some aspect of your plan.
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