Are Mechanical Trading Systems For Sale Any Good?
With an increasing number of ads out there in newspapers and on the Internet, we’ve received emails from readers asking for our opinion on mechanical/automated trading. Should we all rush out to grab one of those mechanical/automated trading systems that are for sale? The lure of such get-rich-quick advertisements certainly appeal to those people who want to make money but are not interested in learning how to.
Our view is that even if those systems are working at the time they are sold, they will soon stop working as more and more people use them. The main reason is that when brokers start noticing many simultaneous orders being placed at the same time, they will create systems to either trade against those orders, or anticipate them. So, profitable automated trading systems will lose their magic once too many people start to use them. Additionally, why would someone who is successfully trading an automated system want to sell it and lose his or her trading income as more and more people use the system?
Besides, even if someone were to use these systems, he or she would have to periodically adapt the systems to changing market conditions. And if that person doesn’t have a full understanding of the systems and the markets, it would be very unlikely to keep these systems profitable over a period of time.
Why is teaching discretionary trading different from selling a mechanical system?
With a mechanical system, trades will automatically be placed in pre-determined market conditions. This means that every trader’s computer that is running the system will place the same trade at the same time, thus affecting the market and the results of the system.
On the other hand, with discretionary trading, a trader ultimately makes his or her own trading decisions as to when to enter and exit a position by taking into consideration a multitude of factors influencing any given currency pair. Thus, the chances of traders who have learnt the same techniques placing exactly the same trade at the same time are very slim.
If you are considering a mechanical trading system, it is better for you to design and test that system yourself rather than trusting blindly in a system for sale which you don’t understand and cannot be sure if the system is profitable or don’t know how to adapt it to changing market conditions.
And in order to reach the stage whereby you can design and test your own systems, you will need a good understanding of technical analysis and the psychology of the forex market.
With an increasing number of ads out there in newspapers and on the Internet, we’ve received emails from readers asking for our opinion on mechanical/automated trading. Should we all rush out to grab one of those mechanical/automated trading systems that are for sale? The lure of such get-rich-quick advertisements certainly appeal to those people who want to make money but are not interested in learning how to.
Our view is that even if those systems are working at the time they are sold, they will soon stop working as more and more people use them. The main reason is that when brokers start noticing many simultaneous orders being placed at the same time, they will create systems to either trade against those orders, or anticipate them. So, profitable automated trading systems will lose their magic once too many people start to use them. Additionally, why would someone who is successfully trading an automated system want to sell it and lose his or her trading income as more and more people use the system?
Besides, even if someone were to use these systems, he or she would have to periodically adapt the systems to changing market conditions. And if that person doesn’t have a full understanding of the systems and the markets, it would be very unlikely to keep these systems profitable over a period of time.
Why is teaching discretionary trading different from selling a mechanical system?
With a mechanical system, trades will automatically be placed in pre-determined market conditions. This means that every trader’s computer that is running the system will place the same trade at the same time, thus affecting the market and the results of the system.
On the other hand, with discretionary trading, a trader ultimately makes his or her own trading decisions as to when to enter and exit a position by taking into consideration a multitude of factors influencing any given currency pair. Thus, the chances of traders who have learnt the same techniques placing exactly the same trade at the same time are very slim.
If you are considering a mechanical trading system, it is better for you to design and test that system yourself rather than trusting blindly in a system for sale which you don’t understand and cannot be sure if the system is profitable or don’t know how to adapt it to changing market conditions.
And in order to reach the stage whereby you can design and test your own systems, you will need a good understanding of technical analysis and the psychology of the forex market.
