To Look or Not to Look ? : Setting and Forgetting in Automated Trading.

We all fear that moment when we open up our trading terminals to find out that some portion of our profits or even worse, our initial investment capital, has been wiped out. Looking into a trading account continuously is one of the hardest things to do when getting involved in automated trading and certainly the emotions and reactions that take place when we do so lead to many of the devastating consequences that make profitable automated trading a very hard thing to achieve for most new and inexperienced traders. For many people new to automatic trading execution the answer to this problem – in which looking into losing trades makes them lose control – is a simple “I’d rather not look”. On today’s post I am going to discuss this issue a little bit and why you cannot expect to be successful just by “setting and forgetting” and “avoiding to look” when using algorithmic trading systems.

There is something very hard about looking into a losing account or an account with trades in open draw down that makes us want to forget about them or do something to make this stop. Definitely when people start to actively deal with their accounts they generally take very bad decisions that end up costing them far more capital. Inexperienced traders usually change systems upon draw downs, interfere with the trading of automated systems and get desperate and frustrated when things spend a lot of time going against them. However, given the knowledge that long term profitable systems are hard to trade because of this, many new traders simply decide to “forget” about the accounts and system to avoid intervening and dealing with the psychological aspects of trading.

This decision is absolutely logical and it is the easiest and most obvious answer to the above mentioned premise. If you’re telling me that long term profitable systems are hard to trade because they have long and deep periods of draw down then I’ll just trade the system and forget about it so that I do not interfere nor suffer from these draw down periods and their existence. Although this may sound good at first, this is a very dangerous road that often leads to as many losses as the first one.

In order to understand why this is the case we first need to see how people who are indeed successful with mechanical trading systems achieve this. Definitely it is not by not looking at the systems but my gathering knowledge, strength and confidence by doing the exact opposite. The difference between an experienced and an inexperienced trader is evident when you look at the ways in which they react to the exact same situation. While within a draw down an inexperienced trader would suffer from despair and fear (only avoidable by not looking at the account) the experienced trader can look into the account and see a temporary cycle which is just a pair of his or her regular business goals. If the account then goes onto a cycle which signals that it has become too risky to be traded the experienced trader will quickly realize this and eliminate the system from his or her portfolio while the other trader will trade the system to oblivion since he or she isn’t even paying attention.

What I am trying to say here is therefore pretty simple : it is not about setting and forgetting and avoiding to look into your systems and accounts, it is about looking into them and understanding what they are doing and if what they are doing is part of what they are supposed to do. Certainly at first trading long term profitable systems will require a lot of self control and discipline from new traders but in the end this ability to look at the accounts, understand, expect and evaluate in a cold-headed manner is what distinguishes the few that do make it in this business from the big crowd of traders who fail at this endeavor.

My advice here is therefore quite straight, if you want to succeed at automated trading you should keep a close eye on all your live accounts and on their performance. When you feel emotions because of their profits/losses, turn them into understanding, learn all the ins and outs of your system’s logic, its profit and draw down characteristics, what it is supposed to do and how it does it, only in this way will you be able to achieve success in this very hard business called automated forex trading.

If you would like to learn more about my experience with algorithmic trading strategies and how you too can receive a true education in automated trading please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach to trading systems. I hope you enjoyed this article ! :o)

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7 Responses to “To Look or Not to Look ? : Setting and Forgetting in Automated Trading.”

  1. Andrea says:

    hi daniel,
    exuse me if i post a comment now, i try to read all your old posts 1/2 per day. i think they are very usefull for me. i have a full time job, i work in a office with full time internet connncection and i control tha accounts 3/4 time a day.
    every evening i debrifing the trading day, i update the trading diary, look for setup entries, study, etc.
    i dedicate about 1,5 hours every evening to trading.
    i would ask you, if, in your opinion, in this situation i can trade only daily systems, or if i can try system that work with faster time frames.
    thanks for your comments.
    andrea

  2. Daniel says:

    Hi Andrea,

    Thank you very much for your comment :o) I believe that you should use systems that do not demand a significant amount of time or put a lot of stress on what you are doing. Since you cannot actually stay on the screen for at least 8-16 hours (which is what is necessary to trade a manual system based on lower time frames) I would advice you to stick with longer term systems and setups that you can trade within 1.5 hours or less every day. Perhaps you could also trade a system on the 4 hour or 1 hour time frame if the system just trades within a single hour (like a fixed breakout system).

    I believe that in your case the best thing would be to stick to time frames that do not cause you any stress and that you can trade with the time you have available. After you start gaining much more experience and you start to gain some financial freedom from trading you can start thinking about shorter term setups. However in the longer term smaller time frames do not mean more success and you can be successful in a much easier way by using the higher time frames.

    Thank you very much again for your comment :o) I hope my advice is useful !

    Best Regards,

    Daniel

  3. Andrea says:

    Thankyou, Daniel.
    then, are there any systems that you have developed and tested (like the one you posted yesterday) or within Asirikui that i can use?
    andrea

  4. Daniel says:

    Hello Andrea,

    Thank you for your reply :o) Since Asirikuy deals mainly with automated trading strategies there are no manual trading systems like this which you can use. This is also the first one of this kind I release in this blog so you won't be able to find more.

    I would recommend you read publications such as Currency Trader Magazine and Active Trader where you will be able to find information about many different strategies that are designed and evaluated over extensive periods of time. I would consider a subscription to Active trader and a regular read of currency trader vital tools for anyone who wants to gather a good portfolio of daily trading systems.

    Thank you very much again for your reply :o) I hope this helps !

    Best Regards,

    Daniel

  5. Andrea says:

    Hi Daniel,
    Thankyou very much for your advice.
    have you ever write a post where you explain why a full time job can't trade your automatic ssystem? If no, can you tell me why I can't trade your system?
    thanks
    Andrea

  6. Daniel says:

    Hi Andrea,

    Thank you for your comment :o) I was talking mainly about manual trading systems since the time required to execute them needs to fall in line with your full time job. However you can certainly use any of the automated trading systems within Asirikuy to trade without having to spend time executing the strategies. However you still need to spend sometime evaluating them and reviewing their performance (as I say on this post). I hope this clears it up :o)

    Best Regards,

    Daniel

  7. Daniel says:

    I also forgot to mention that all the systems within Asirikuy are also analyzed through ten years of historical performance and all the trading tactics are fully disclosed.

    However bear in mind that Asirikuy is an educational website and that its main goal is to help you achieve long term profitable trading using automated trading systems through education and understanding, learning how the systems work, how they work, why they work and how you can build your own systems to exploit market inefficiencies in a mechanical way. If you are interested it would be great to count with you as an Asirikuy member :o)

    Best Regards,

    Daniel

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