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Is Building Your Own Automated System Better Than Buying an Off-the-Shelf Black Box or Robot?

Automated trading is becoming increasingly popular and large numbers of traders are disregarding their old manual trading systems and replacing them with automated trading programs.

Automated trading is becoming increasingly popular and large numbers of traders are disregarding their old manual trading systems and replacing them with automated trading programs.

 

The main reason for this is twofold. Firstly, traders are finding it progressively more difficult to compete in the new technology driven markets using manual trading systems and secondly auto forex trading systems are far more consistent and profitable in the long run.

 

When considering an automated trading system one needs to decide whether it is more appropriate to buy a generic program (know as a Black Box) that you plug into your trading platform, or to build your own system from the ground up.

 

Choosing a retail, black box system can be challenging. I've learnt that it is very difficult to test a system effectively that somebody else has built. Especially when you have to pay money for it first! To get the most out of a system you need to know and understand it in great detail. You'll know every component of a solution that you built yourself, whereas you may get frustrated assessing the viability of a system that you bought.

 

Markets are dynamic; they are constantly changing and evolving. A system that worked over a certain period of time may fail miserably when market conditions change. By building your own system you will be able to make the appropriate adjustments if the systems' profitability deteriorates due to ever-changing conditions.

 

Each forex trader has his or her own set of risk management criteria. Some traders may be happy with a steady 10% return per year, whilst being very concerned about draw-downs of more than 5%. Other traders are looking to double their accounts in a year and for that are willing to accept a 50% draw down. Besides risk profiling, there are other aspects that make every forex day trader unique. Factors such as the number of trades they perform or their beliefs about the market and the instruments they like to trade. Your own forex auto trading system can be built as a tailor made solution to match your specific risk profile and criteria.

 

It may be harder than you think to find the right auto trading system for your specific needs. You may find that it becomes an expensive process as you buy and then test various systems in an attempt to find one that suits you. Remember, systems that don't work cost money to buy but also cost you trading capital when they don't perform. It is therefore worthwhile to build your own system and spend your time and money on perfecting it.

 

Back testing, optimisation and any tweaks or adjustments need to be done to a system to ensure its success and compatibility with your trading. There's more flexibility to perform these tasks if you are the developer of your own solution.

 

 

There is no “one size fits all” solution to the forex markets. Many black box solutions imply that they work for everyone, in all conditions. When you build a system as generic as this you will have to sacrifice performance for suitability.

 

What happens when your automated trading system stops working? It may just be a losing streak, or it may well be something more serious. If you have built your own trading system software you will be able to analyse your system and make the necessary changes to ensure that it returns to profitability. Constant monitoring of your system and the trading conditions is essential for consistent profitability. Science and history have shown that it is those who can adapt to change that survive. Markets and conditions are changing rapidly. New technological developments, market regulations and advancements in telecoms are changing how markets operate. Continuing to use a system that is no longer suited to the trading conditions can end in disaster.

 

Knowing and understanding the structure and components of your automated day trading system is vital to ensuring its continued profitability. If you are trading somebody else's system you may need to ask them to make the changes and this could cost you to do so. I have seen programs that can be bought inexpensively, but the upgrades and additions needed to make it suitable to your trading requirements are expensive.

 

One of the key lessons of trading is that you need to take sole responsibility for any losses that you make. Don't blame the market, the media, the government, trading platform and your broker; or you will never be a winning trader. Using an automated trading robot that you bought gives you yet another component to blame for your lack of success in the market. Build your own system and take full responsibility for your trading success.

 

If you want to be a professional traderArticle Search, you should take time to master your craft. Mastery of trading requires that you build your own systems. After-all it may not be as difficult as you first imagine. Most of the scripting languages have been designed for traders not programmers; they are very end- user friendly.

 

Spend some time learning how to build a system and you will have the knowledge and groundwork to build many systems to suit varying requirements and markets. It’s an investment in yourself that will benefit your trading over the long term.

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR


James Wilton is a qualified IT professional and full time Forex and Futures trader. His website www.trading–automated.com provides free educational information to share the exciting concept of how individual traders can profit from Automated Trading.



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