Discretionary Trading vs Automated Trading

[fx-programmer]

The core of AI is the learning capabilities of the computer program to adapt.
Essentially your brain is a biological computer program which is prone to tiredness and emotional psychology.
The program does loose, but it learns.

Elliott wave analysis is based on human psychology but lacking in momentum, yet big funds still use it.
It takes only a few mil to move the futures market, but the Forex can only be moved by a state.........

My program uses fib retracements,fib confluence,market profile,trend confluence points,pivots,gaps,moment um,external news params,Elliott waves,convergence,diverge nce, etc - now can you track so many params on 50 vehicles at the same time??? I think not !

Sorry mate, it is not my place to say that humans lack the capability to profit consistantly, but if you traded long enough you now know that the best way to hedge your bets is to trade many markets at the same time - and this my friend can be done better by a network of CPU's like we do.

	Quote:	brownsfan019
	A human trader doesn't have to match the program's speed unless you trading vehicles that are so volatile that you can't blink w/o missing something. Quite a few of us here trade the e-mini futures and it's not exactly hard to get your trades executed... even in quick markets. I'm sure this really, really complex computer program is making money now, but over time, just like any other program out there, it will die. We have yet to achieve the point where a computer program that is made by humans can adapt to changing market conditions. So the question then becomes what happens when (not if) this 2 yr project stops working? Back to square one? No thanks... I'll just do the adjusting myself and stay in tune with the markets.

[Thoth]

	Quote:	torero
	I found this page on this method, is this as true to the original concept you mentioned? Trader.Online.pl® - MetaStock™ Zone - Oddball S&P System by Mark Brown

Pretty Much I think that is Mark Brown's OddBall System, he proved you can look at one market and trade another. Also note the web sites bottom note:

This avoids the pitfall of basing real trading on unrealistic system tests that generate signals on the close at the end of the session


Note: If a trade is signaled at 4 p.m. EST, you have 15 minutes until the close of the market to place the trade in the S&P futures (it is not possible to do this when trading the SPY). This avoids the pitfall of basing real trading on unrealistic system tests that generate signals on the close at the end of the session, when the trade can in practice only be initiated the next session. In such cases the price may have moved farther away from where the test indicates the system was filled, giving a false reflection of the system's performance.

OddBall was a ground breaking system and it still works pretty good - it was free keep in mind. Noted by profs at MIT as one of if not the best trading system ever developed.

[torero]

Is anyone using this system or a modified version of this system? Any success?

[Jakew]

My take on the subject is that both automated and discretional trading can be valid.

However very short term trading is probably better served by discretional decision making, especially as to entry and the type of setup to use (because of the "market climate" prevailing), though not the exit decision. Exit must be automated even in discretional trading just because human nature will statistically do more harm than good in the realm of exits. I other words I belive in intuition at entries but not exits. It is so because when thinking/feeling (whole brain) about entry you are not in the trade yet, and the condition of being in the trade changes your intuitive capabilities for the worse. For entries at least I can use emotional triggers with considerable benefit, it doesn't work with exits in my case. Emotional input cannot be really automated, or in a way it can be (say 1 for I feel this looking at the chart/tape, 0 for I don't feel this) but would it be still... well... automated trading, with emotion of an individual coded in?. Perhaps, but not a black box for sale, just your own one of its kind wholistic system?.

For relatively longer term trades I suppose automation can work better than for very short term trading because of the logic of the R-multiples of these trades: it is not as important if the entry suceeds (and it is very important in very short term trading) becuase the opportunity cost of not taking a systemic entry is way too high to even think of not taking an entry - just because you risk very liitle with your stop loss compared to the much more formidable risk of missing a high R-multiple win.

[waveslider]

Good point Jake about how your mindset changes once in a trade. If you are trading discretion it is very hard to see the market move your way without moving your stop up too aggressively. Even if you have a sound methodology, you trick yourself into getting out too early in order to hold onto profits.

A successful fund manager once mentioned to me his idea of the best mechanical system:

Take a room full of newbie traders and tell them they are trading real money, let them trade it however they want. Then fade their emotional decisions.

[Reaver]

I firmly believe that if a system were able to be automated to the point it could make money...eventually it would end up with all the money in the markets, given enough time of course.

That is why I do not believe 100% fully automated systems are feasible as far as profiability goes.....just doesn't make sense to me. Although of course, the paradox lies in the fact that many system traders are in fact profitable...so to each his own...Yes I am aware that I contradicted myself...life is full of mysteries, huh?


But I have my own beliefs, and they preclude me from automated trading.

I prefer using my brain and my understanding of the market-however small it may be- to make decisions...maybe it is the challenge of figuring things out that makes we lean this direction..but I find it rewarding to make money based on my decisions, and not the decisions of a formula, system or computer....

[Dogpile]

thought this was interesting rumor/fact on something that came out end of this week regarding 'program trading':

"one of the largest firms specializing in algorithmic "black box" auto systems (market making), had taken a rather large hit the prior few days, and had turned off all their auto-trading systems."

http://futurepathtrading.com/content/view/362/69/

(good blog by the way)

[Reaver]

	Quote:	Dogpile
	thought this was interesting rumor/fact on something that came out end of this week regarding 'program trading': "one of the largest firms specializing in algorithmic "black box" auto systems (market making), had taken a rather large hit the prior few days, and had turned off all their auto-trading systems." http://futurepathtrading.com/content/view/362/69/ (good blog by the way)

Thanks for the link.

Not knocking those who choose automated systems...but if I am going to lose my money, I want it to at least have been my call to do so.

[Nvesta81]

This link is recent and somewhat pertinent to the discussion.

http://money.cnn.com/2007/08/09/mark...ion=2007080915

[brownsfan019]

Interesting articles guys, thanks for sharing. The thing is, we'll never really know what has caused this tremendous volatility. My guess it's a combination of a whole bunch of things occurring at the same time.

The only question I really have is - when will this volatility dry up and why?