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Trading Systems and the Human Touch

Trading Systems
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As you may guess from the foregoing, I’m not a big fan of the programmed robots that trade your account for you. That’s not to say that they can’t work. I set that one (that claims to double your account every month) to work on a demo account 15 days ago, and I see it’s currently reporting an account value of $5111.93, from a starting value of $5000. And although that’s nothing like doubling the account, to gain over 2% in half a month must work out to about 50% a year, and I don’t know many no effort ways to get that.

But I have no confidence that the performance will continue that long. This install was a new one, with the latest algorithms, tuned for the current market. I still don’t know what it’s doing, and I won’t know that it is going to fail until it does, because I have no idea of its inner workings. I suspect it’s momentum based, and uses moving averages to find its trades, which is fine while the market is moving in a suitable way. Update: by the time I finished this report, the robot had a losing trade which was over $100, putting the account more or less back to square one.

The problem is that a computer gives a specific answer to a specific question, and doesn’t want to deal with maybes. It’s not possible for a computer to “see” the big picture, it only deals with the fragments it is programmed to do.

What About The Others?

One important aspect of trading is how other traders see the charts and react to them. For instance, in the matter of support and resistance, they only exist because traders perceive the tendency for prices to rebound from certain levels. If your program does not include a way to perceive charts in the same way as a human trader would – and how can it? – then it is missing a vital element in trading.

Now this is a good thing, as long as you don’t yearn for a computer to do all the work of trading for you. If it really was possible to make computers or software that would do this consistently, then thousands of computers would be set to work, and there would be no place for the individual trader. But as it’s not possible, the individual trader who learns the business thoroughly and applies whole brain thinking has the potential for a very profitable career.

Why You Must Do It Yourself

But that’s enough ranting from me about black box systems versus doing it yourself. Curtis Faith was an original and successful Turtle Trader. If you have been considering or perhaps even studying trading, you are probably aware who the Turtle Traders were, and may even have read Curtis’s bestselling “Way of the Turtle”. Last year he put together another book, and I was able to get a pre-press copy of it for comment – the published book includes my comments on the back cover, and facing the title page (I wasn’t paid for providing comments, or for any book sales).

His book is called ‘Trading from Your Gut’, and I recommend that you read a copy to find out from a famous trader who earned more than $30 million trading with the Turtles how he views the art and science of trading with a ‘whole mind’. Instinct and analysis are both needed to be a successful trader. As he explains eloquently, trading is something that no machine can succeed at in the same way as a person.

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