Five Automated Trading Myths : Clearing Up Some General Misconceptions

In general I feel a little bit sad when I read every new expert advisor website because I know from experience that most of the things they say about automated trading are simply lies. I think that people believe these sellers due to their desire to find an easy and quick way to build riches but in the end when doing so they only achieve further frustration and financial loss. I feel that after having some years of experience with automated trading – particularly with the metatrader platform – I can now point out some of the “general myths” surrounding automated trading systems (both good and bad) and what I have found out to be the truth behind them and the actual reality behind all the hype or misinformation.

Within the next few paragraphs I will talk to you about what I consider to be the most prominent five myths that have surfaced in automated trading, what is true about them and what is totally false. I will do my best to be bluntly honest in the hopes that my efforts will help those of you who are looking for answers realize what the actual reality behind automated trading – from someone who works at it full time – actually is. So get ready and keep on reading to see what this five BIG automated trading myths actually are.

Myth One. You can be profitable with automated trading even if you don’t know anything about forex trading. This is a very common thing EA sellers say and it is the main reason why most people approach automated trading. You feel you don’t have enough time or knowledge and you want to trade like a pro so you simply load the EA and it will make you rich ? right ? The truth is that it won’t because understanding what the system does is vital for your success. If you don’t know the system how will you know if it has become too risky ? How will you know if it uses a sound trading strategy ? How will you know that it is likely to work for the next 10 years and not the next 10 days only ?

Myth Two. There is no emotion in automated trading. This is absolutely false since YOU are deciding if the trading system runs or gets stopped, as a matter of fact automated trading is FILLED with emotions because you are a human and you are making the decision of whether or not to run the strategy. When the strategy goes into draw down you will have emotions of fear and when it goes into profit you will experience greed. There IS A LOT of emotions and psychology in automated trading and ignoring that is a sure path towards failure. Learning to understand these emotions and dealing with draw down and profit periods rationally through analysis and understanding of systems is therefore VITAL for success.

Myth Three. Automated trading systems always stop working as the market changes. This is one of the most common myths amongst those people who have had some experience with automated trading systems and saw that they made some profit and then went into draw down. This myth is in fact a consequence of a general lack of understanding about trading systems and the cycles they go through. I have shown during the past few years (certain long term trading systems like the turtle trading system have shown through the past 3 decades) that a system can keep on working if it adapts to the markets as they change through some simple criteria. So in reality many system will in fact “stop working” as the market changes (they will become extremely risky) but others have shown that through the use of simple adaptive criteria they can survive a WIDE variety of market conditions.

Myth Four. Automated trading system do not work. Again, this is generally a myth that has been put up by those people who have failed to achieve success with algorithmic trading systems. Usually these are people who have gone out, bought commercial experts, expected holy grails and got a load of account-wiping and unsound trading systems that got them nowhere. Automated trading systems do work and the fact that I have been able to achieve a living from them proves this point. It is not that these systems do not work, it is that adequate analysis, expectations and knowledge are necessary to create them and use them properly to achieve long term success. The use of sound techniques, strong reliable evaluation and general long term outlook are vital to achieve success.

Myth Five. If automated trading worked, everybody would be doing it. This is generally one of the first things people who are unfamiliar with the whole world of automated trading ask me. If what you do is simply execute some code into a computer then why couldn’t the whole world do this to achieve profitability ? The answer lies in the fact that automated trading systems that are likely to be long term profitable are EXTREMELY difficult to trade. You would think that this is not so bad but in reality only few people can have the confidence and understanding to deal with the draw down periods (which are often long and deep) inherent to the actual trading systems that do make an eventual profit. Donchian channel systems have been out there for 40+ years and have proven to succeed under extremely varied conditions, yet few people ever use them because of the above mentioned reasons.

In the end automated trading is no different than manual trading. It is not a shortcut and it is not an easy way to do things, nonetheless it is also not an impossible thing to do to be profitable. Automated trading – as manual trading – is psychologically demanding, requires extensive knowledge about what you are doing and allows you to achieve realistic profit targets when you do things the right way. Sadly succeeding in automated trading is not something most people can do and the reasons are mainly within the above five myths. Most people simply tackle this as an effortless way to get rich and they do not want to do the actual effort to get a profit and a “down to earth” perspective about what can and cannot be done in trading.

Hopefully some traders in the end realize that it is not easy but that it is doable and they are willing to do the effort and go through the learning process necessary to get there. If you would like to learn more about educating yourself around automated trading and how you too can build systems around sound trading techniques that are likely to be long term profitable 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 !

Print Friendly, PDF & Email
You can leave a response, or trackback from your own site.

Leave a Reply

WordPress › Error

The site is experiencing technical difficulties.