Computer Systems And Algorithmic Forex Trading Issues
Are you able to actually make cash by following a computerized foreign exchange trading system? Well a little while ago I acquired one and knew the vendor and knew one of his clients made $1.4 million with it actual money in only a few years. Now that sounds great – but there is a catch with computerized trading systems.
Naturally the tough part is executing them – may I explain this in more detail. I bought the system and it consisted of one parameter and that was it. The logic was easy to comprehend and you might see why it worked long term – but did you know what?
I didn’t execute the system in line with the signals and this is a typical problem. My reason was it was at the start of my currency trading career, I was trading money I could not actually afford losing. I put my very own input in messed up the system and got my reward – a big loss.
The majority of the systems sold are junk. I know now with my experience of trading 99% are junk and will never re produce the gains they make on track records presented – Why?
Well at least on the one which I traded had a real time past history. However most of the computer systems sold today is by selling firms who simulate in retrospection a track record. Now everyone can do that knowing the closing prices! This is commonly called back-testing.
They are normally based on rules that aren’t revealed, or rules that’ve been curve fitted ( if you do not know what curve fitting is look up my other articles ) and the trader who assumes he’s going to get rich for a few hundred bucks or so gets wiped out – lesson understood.
To trade in a system, you really need to go looking for a real time previous record but even allowing for this, you are facing a problem :
If you are following a currency trading system always believe the worst drawdown is ahead ( and very few good ones drawdown by less than 30 percent ) so , when studying the previous record, don’t look at average drawdown, look at worst peak to valley drawdown in amount and period of recovery and accept that is’s going to happen – that way things can only improve.
Following the markets – If you follow a mechanical trading programme don’t watch the news! If technical analysis is your forte go with a reliable forex trading software. Whilst we all know its wrong and reflects the herd, when your trading system opposes those reasonable stories stories, you have got a problem of discipline and listen to me, those stories stories can scare the hell out of you and cause you to feel dumb for following even the best systems.
Pay too much attention and you are tempted to meddle with the system and that implies the end of your system. It does not go with the forex trading strategies. The system I traded on and lost, won for many of us and its logic is unending – but I made no money with it which taught me one of the most important lessons of my forex trading career.
Following mechanical trading systems is tough and you must be trained at all points.