How to be a Trader: Automated trading, &
Inexperienced traders are very attracted to automated trading to avoid the hard work of learning to trade and
there is the appeal of automatically making money while enjoying a life of leisure on the golf course. More
people make it in trading as a discretionary trader than has an automated trader. To make it in automated
trading you need to have several diverse systems operating in uncorrelated markets. Any one trading system will
only make money part of the time and can go into prolonged losing streaks. I have developed a number of trading
systems that work but I only use them part of the time, those times when the market conditions suit the system.
The average profit per trade is frequently small when losers are included and your broker will take away most
of the profit on your automated system through trading fees.
Slippage is the difference in price between the last trade that you saw and the price that you actually got when
you put in your market order. Limit orders are not subject to slippage but are frequently not filled. Most trading
systems look pretty bad when slippage and commissions are included unless they are swing trading systems
which capture moves in the market so big that slippage and commissions are insignificant. Automated system need
to be watched when they are in automatic to correct synchronization problems. If your data feed is interrupted,
usually at night when data servers are taken down for maintenance, your trade will often be orphaned when data
is reconnected and everything is recalculated again. There are two places that you might look for automated
trading systems that actually work: www.clayburg.com and www.etrackrecords.com.
You need to "get an edge" to make money. Your edge is composed of several elements that, when used together,
will make you successful. Equipment is one element of your edge. To make consistently good trades you need
to have an edge with both technology and methodology.
If you are driving a car and you can't see out the side or back windows and your windshield is very small, you
will not be a good driver. Sure you can get there but you are at severe risk of crashing into something along
the way, or getting lost. The same is true with trading in that you need to see the big picture to be successful
in the long run. Having a lot of monitors will seem confusing at first but it is no more confusing that driving
a car with a lot of windows. so the first edge in technology is more monitors. Your typical Dell or HP computer
is fine for home and office use but it will not support enough monitors for trading.
The second equipment edge you need is speed. When the markets are moving fast you will need a strong computer
to keep up. The clock speed on the processor is very important and should be as fast as possible. You should
also have a very good Solid State Hard Drive. I recommend
www.tradingcomputers.com where you will find the equipment you need at a reasonable price.