If you’ve been making investments, you have most likely already read a little about implementing an automated trade system. Before you do this though, you need to first define this phrase and determine if it can do you any good.
Before anything else, take note that traders define automation differently when they apply the term to trade plans. Investors who have been in the markets for a very long time would most likely be in search of services or tools that can automate only a portion of their trading approach or plan. The best example for this is an auto feature for stop losses. The automatic feature here is the instant trigger of stop loss orders under specific conditions.
From the viewpoint of an expert investor, selected auto features in a service or tool are essential. In the example given, traders no longer need to call their brokers with an auto stop loss option enabled. In a sense this still fits the expert definition of what an automatic trading system is.
On the other hand are traders who treat automation in a different way. What they may really want out of an auto tool is a way to completely automate the stock, options or forex trading system from start to finish. They expect to only have to install a program or piece of software that will generate recommendations for them to execute when they trade. These tools don’t require a lot of effort and time from their users.
The second definition deserves closer scrutiny. In the first place, you should want to know if this even actually exists. The truth of the matter is that there really are some software packages that give investors this impression of complete automation. In some circles they are called black box systems.
To be more exact, systems that are under the black box category give users trade suggestions based on pre defined elements given to them. These aren’t the best products to go for since there is no existing automated trading system that can do better than real people when it comes to analyzing trades. When you get a suggestion from a program, there is no clear explanation on how these recommendations were reached and you are left with no idea with regards to reliability.
Moreover, black box systems are not made to fit every single individual. Bear in mind that people aren’t all the same when it comes to risk level tolerance, investment preferences and psychology. This means that systems should really be made as fitting to individuals as possible. This is the only way you can manage losses according to what you can withstand.
In effect, a trade system is ideally suited to you if it has been freshly constructed with your unique personality and preferences in consideration. If you find it too difficult to make something out of nothing to begin with, you can always take the next best step which is to take a plan made by someone else and modify it.
In short, a wholly automatic trading plan is not ideal if you want the best possible profits and chances of success. There is nothing out there that can help you make 100% winning decisions. If you absolutely want to get into automation, settle for products or services that permit limited options for it.