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That video posted up a while ago on the forums about the crash of Long Term Capital was great. Putting 100% faith in a rigid system is a recipe for disaster. There are countless philosophies across a wide range of disciplines which derride rigidity as the downfall of any person or system. Look at Bruce Lee's philosophies on martial arts!
Like torero said, in a bull market you don't need much skill to make money, discretionary or automatic. For a while now these automatic systems have enjoyed the run up and the programmers have been taking the praise. However with the recent volatility, and the market falling like a knife (just try picking the bottom on this one!) these systems aren't coping. They are too rigid.
All automatic systems are based upon the thoughs of humans. Their advantage is that when it comes time to act the system will act without hesitation. However what a distretionary trader has an advantage over is in adaptation. A discretionary trader would have made a killing over the last 24-25 days where as these large funds are posting losses. |
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Yes very true about adapting to market conditions and adjusting strategies. This is something discretionary traders clearly have an edge over automated bots. Fund managers fear volatility while day traders crave for it. For those who havent got a chance to watch the LTCM documentary take a look here:
http://www.traderslaboratory.com/vid...Bet%20Nova.wmv
Its a great documentary so worth your time. If anyone else has any financial films/documentary it would be appreciated as it is relatively hard for me to obtain them here in Japan.
I also want to add that learning market profile gives traders a tremendous edge even if its just analyzing end of day market action. Day by day thorough analysis gets you in the zone and alert to changing market conditions. Although candles and volume do help, being able to visualize a profile can offer clues not visible through just a volume and price chart.