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Automated Trading With a Purpose

Having a clear set of rules and criteria that are executed on a consistent basis is a good tool to have as a compliment to discretionary trading.

Quite often, traders develop automated strategies with the expectation that the strategy alone is all that is needed to accommodate and take advantage of emotional and psychological behaviors of everyday traders. This leads to false hope and disappointment of many traders.

Experienced traders rely more on learning to master fewer techniques and focus more on efficiency. This is where automated trading is at its best. Automated strategies are more effective at evaluated 100’s or 1,000 of charts and price action on stocks, futures, etc…for set-ups, market conditions, and pattern failures. These are the opportunities traders rely on for their next trade. So to say that automated strategies don’t work may be an overstatement of their intentions and how the developer has set expectations of them.

The simplest strategies usually are the better ones long term. No strategy or technique works well all the time, hence it is important to understand how to filter out those occurrences when the strategy weakens. Trading strategies that are risk tolerance based with reasonable expectations usually do well and have a positive expectancy. That’s all a good trader could expect from a consistent set of rules and criteria, right!