Does Robot Trading Work?
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Everyone wants an easy way to make money trading securities. We want an automated process that requires no thinking on our part. Just plug and play like the rest of our lives.
Why does Robot Trading appeal to People?
- Fear is what keeps us from trading. Fear is what makes us stay in a bad trade too long. Fear is what makes us get out of a good trade too fast.
- We all want to be rich. We want to stay in that bad trade hoping it will turn around. We want to get out of that good trade too keep our profit or maybe we stay in too long thinking it will go up higher.
- Developing REAL trading skill takes time and practice. Everyone is always looking for a shortcut to trading for income.
- Most people are too lazy to put the time and effort into something to be good at it. We want a shortcut. The easy way.
- We all hope to better provide for ourselves or our family. We WANT to believe the hype surrounding Trading Robots. We WANT to believe that Robot Trading is the answer to all of our hopes and will provide us that mythical money machine. We just turn it on and it literally prints cash.
Ok, you all probably know what I stated above is true, but the REAL question is does Robot Trading work?
Well first of all, most trading systems are optimized. This means they are usually adjusted to work when they are back tested. This means they are specifically designed to be profitable the way the market traded in the past. Which MEANS when market conditions change the robot trader will fail.
Secondly, the markets are a zero sum game. This means for every winner there must be a loser. So, if a really good Robot Trader was designed smart traders would start trading in a way that takes advantage of what that Robot Trader was doing. Again, market conditions change. Maybe that is why?
If someone DID design a Robot Trader that really worked, why would they sell it? They could make a lot more money letting it trade their accounts. They would not want the general public to know how they were trading. There would be a lot more money in letting their robot trader work their accounts than in selling it to others.
Most of the Robot Traders you are going to find out there are relatively inexpensive. If someone put the time, money and research into developing a quality robot trader do you really think they would sell it for a small amount?
We have tested a lot of robot traders over the years. Found a couple that worked pretty well trading Forex, for a while. In the end the programs that were most consistent used a martingale system of doubling up every time the trade moved against them until there prediction was correct. They used probabilities to ultimately be successful. The problem is that works, until it doesn’t and you have lost your entire account on one trade after 10 successful ones made you over confident.
You also will have difficulty in virtual trading a trading robot because you are not getting real fills on your position but simulated ones. That is always a problem when paper or virtual trading but since most people really want the robot trader to work the tend to put a lot of belief in the results of their virtual trading.
The bottom line is we do not have a lot of long term faith in the types of robot traders available to the general public.
Just use common sense. If someone had one that worked why would they sell it? If they did sell it, why would it be inexpensive? If you really had a robot trader that could successfully trade the markets it would be worth millions!
Let us know what you think below. We are very interested in your experiences.