It is very curious to see how automated trading has evolved for the past few years. The world of expert advisors seems to have a very special allure which draws people in, consequence of its absolutely attracting qualities that give people the feeling of "playing the game" and being part of the world financial markets first hand. Today I want to write a post about this part of automated trading and how most people involved in this field don't treat it like trading but like a game. I want to talk about the good and the bad things about this and the attitude changes that need to take place if people want to take this to the next level. I know I certainly approached this field as a game first and a lot of discipline and a clear cut strategy were necessary to bring me to the point I am currently at.
The automated trading industry is currently at its infancy and most people who have dealt with this for a few years have found that there is simply nothing certain about expert advisors. There have been systems that have promised heaven and delivered hell, systems which have brought some people massive financial ruin and no answer to the undelivered promises they made. This made people go into a "test before you get there" mode in which people trading with expert advisors decided that there was a logical chain of demo testing and live testing with the live testing being done with minimal risk in the beginning, later increasing risk towards higher levels.
The consequence of this attitude brings us to the current state of expert advisors. According to a few friends I have at brokerages, most people using automated trading systems have less than 5K in deposits with only a terribly small minority having more than this (only about 1 in every 10 thousand). This points out that people haven't really committed money into these systems as they are currently not trading with significant quantities of capital. People are simply running the systems to see what they can do, then most people actually change systems quite frequently, about 1 change every 2-3 months. What are people doing or trying to achieve with this ?
The answer is simple, most people using expert advisors are using them for almost entertainment purposes. People continue to buy systems with limited and unreliable evidence just to "try it" and then cash on the refunds; people are running many systems for very limited amounts of time and most of them are hoping to one day find a system - a.k.a holy grail - which will bring them huge equity gains in very little time with little risk. Sometimes they find an impostor which delivers for a while and then wipes their accounts (courtesy of stubborn systems, which I discussed yesterday).
The truth is that these testing runs without logic, analysis and truly learning about the field of automated trading bring people nowhere as - how I have said several times - knowledge is critical and the "testing without analysis" practice usually leads to the discarding of systems which may have potential and the use of systems which are unreliable. In order to get out of this cycle, the first step for me was actually learning (a lot !) and analyzing deeply. The second step was the creation of a plan answering the simple question : What do I want from automated trading and how do I get there ?
If you are serious about automated trading and you are not simply doing this to play the "find the holy grail game" (which by the way has no winner) then you may want to start to think seriously about learning trading and understanding the systems you are using to perfection. A "black box" won't cut it and it is absolutely necessary - at least in my experience - to understand your systems to a GREAT extent. After you do this you will need to think about a true financial plan with scheduled investments for the next 10-20 years to get you to your long term investment goals. Probably you'll need to have somewhere between 100-200K in investments if you hope to live from automated trading sometime so projecting to reach that target in 10 years from an initial 1K investment plus monthly additions is a good place to start.
As a trader I consider automated trading as something long term and serious and not simply as a hobby or game. For this reason I have committed all my efforts to the creation of systems which aim for long term profitability and not to the playing of the grail game. In my mind, long term reliability and the use of sound trading strategies are much more important than flashing short term profits and unrealistic profit targets, an approach which has worked for me - at least for the past 2 years. If you would like to learn more about my work in automated trading and how you too can design and program your own systems based on sound trading strategies please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
The automated trading industry is currently at its infancy and most people who have dealt with this for a few years have found that there is simply nothing certain about expert advisors. There have been systems that have promised heaven and delivered hell, systems which have brought some people massive financial ruin and no answer to the undelivered promises they made. This made people go into a "test before you get there" mode in which people trading with expert advisors decided that there was a logical chain of demo testing and live testing with the live testing being done with minimal risk in the beginning, later increasing risk towards higher levels.
The consequence of this attitude brings us to the current state of expert advisors. According to a few friends I have at brokerages, most people using automated trading systems have less than 5K in deposits with only a terribly small minority having more than this (only about 1 in every 10 thousand). This points out that people haven't really committed money into these systems as they are currently not trading with significant quantities of capital. People are simply running the systems to see what they can do, then most people actually change systems quite frequently, about 1 change every 2-3 months. What are people doing or trying to achieve with this ?
The answer is simple, most people using expert advisors are using them for almost entertainment purposes. People continue to buy systems with limited and unreliable evidence just to "try it" and then cash on the refunds; people are running many systems for very limited amounts of time and most of them are hoping to one day find a system - a.k.a holy grail - which will bring them huge equity gains in very little time with little risk. Sometimes they find an impostor which delivers for a while and then wipes their accounts (courtesy of stubborn systems, which I discussed yesterday).
The truth is that these testing runs without logic, analysis and truly learning about the field of automated trading bring people nowhere as - how I have said several times - knowledge is critical and the "testing without analysis" practice usually leads to the discarding of systems which may have potential and the use of systems which are unreliable. In order to get out of this cycle, the first step for me was actually learning (a lot !) and analyzing deeply. The second step was the creation of a plan answering the simple question : What do I want from automated trading and how do I get there ?
If you are serious about automated trading and you are not simply doing this to play the "find the holy grail game" (which by the way has no winner) then you may want to start to think seriously about learning trading and understanding the systems you are using to perfection. A "black box" won't cut it and it is absolutely necessary - at least in my experience - to understand your systems to a GREAT extent. After you do this you will need to think about a true financial plan with scheduled investments for the next 10-20 years to get you to your long term investment goals. Probably you'll need to have somewhere between 100-200K in investments if you hope to live from automated trading sometime so projecting to reach that target in 10 years from an initial 1K investment plus monthly additions is a good place to start.
As a trader I consider automated trading as something long term and serious and not simply as a hobby or game. For this reason I have committed all my efforts to the creation of systems which aim for long term profitability and not to the playing of the grail game. In my mind, long term reliability and the use of sound trading strategies are much more important than flashing short term profits and unrealistic profit targets, an approach which has worked for me - at least for the past 2 years. If you would like to learn more about my work in automated trading and how you too can design and program your own systems based on sound trading strategies please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !
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3 comments:
Daniel-
I currently have less than 1% of my tradable assets in Forex and I'm comfortable with that based on my level of confidence in the systems i'm trading.
I've jumped in with larger amounts of money in the past (Zulutrade and Manual Trading) and lost money on forex in the past - in both cases more than 50% of the account.
So I think its smart to go slow add assets as the accounts grow and confidence increases.
I can't speak for everyone else, but the remainder of my assets are in real estate, stocks, CD's cash, bonds, etc.
Its ironic because I spend 2-3x times more time and effort on my 1%in forex versus the 99% in other accounts. Why? Because its fun!
So you are right, there is some aspect of gaming to it. But if I can eventually exceed the long term return of my other assets, why not?
I'm thinking that I can increase my forex returns using EA's and programing with more effort, but i'm not as confident I can increase my long-term stock market returns with more effort.
Am I right? We'll find out, but i'm having fun trying the meantime.
Chris
Hello Chris,
Thank you for the comment :o) Without a doubt I think that you should go slow but my reflection was about the fact that if someone is serious they have to have a clear plan for future investment and development not merely staying within the eternal "grail quest" without ever venturing further.
I know that system development can be fun in forex :o) and this indeed is due to the fact that there seems to be a lot of potential which is not unlimited -as many believe- but capped by the market in a very efficient manner.
Certainly you could also improve your other investments by working on them ! But maybe you feel that the forex market brings you the most potential, without a doubt anything you learn in forex trading will be applicable to other investments and it will only help you become a better investor overall.
Definitely I'm not saying you should not have fun :o) but have a plan for the future and follow it, this will ensure that your efforts in forex trading are meaningful in the long term. It would be great if you focused your blog on EA development and design, I would definitely become a regular comment contributor :o)
Thanks again for the comment Chris :o)
Best Regards,
Daniel
Daniel-
Will do, thanks.
Chris
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