Friday, October 26, 2012

Automate Your Day Trading to Maximise Success and Profits

Day trading commodity futures contracts is a tough business. Especially for beginners, who must compete against experienced campaigners in an activity where the success of one trader is built upon the losses of another.

In this environment, you must have a trading plan. Nothing is more essential to survival and success. Without a plan, you will find yourself adrift in a shark infested trading ocean!

The objective of the plan is clear. It must tell you when to get in, went to get out, how large a position to take, and how to manage the trade. It should be unambiguous and precise.

The plan implements a trading strategy with an "edge". (The strategy will have made steady profits in back-testing, without large drawdowns. Nobody can guarantee the future, but such a plan, based on sound trading principles, has good prospects.)

Beginners soon come to appreciate the necessity of a plan, but that is only the first step. There is still much that can go wrong. The best plan in the world is useless if implementation is botched!

Indeed, if plan development is the entrée, flawless and disciplined implementation is the main course.

That is where automation comes in. A properly documented plan can be implemented automatically, and there are three excellent reasons for doing so:

    Many traders fail because they do not have the discipline to follow their plan. Watching charts during a session is hypnotic, and there is an overwhelming temptation to tinker with a trade, or enter extra trades outside of the plan. Automated trading beats this problem, because the computer trades for you while you do something else. Computers cannot be tempted, they are not impatient and they are not subject to fits of recklessness.

    Even if you are disciplined and stick to your plan, it is easy to make a mistake. You may be tired, you may be rushed by fast price action, you might make a simple arithmetic error, you might click the wrong button. Mistakes are usually expensive; missing just one winner, or turning one winner into a loser, can easily destroy a trading month. With automated trading, errors are eliminated. The computer executes the plan accurately every time, at lightning speed.

    Not everybody has the time or temperament to sit in front of a computer for hours each day waiting for the kind of opportunity which triggers a trade. Some poor souls have to work while markets are open. Others, like me, are in different time zones and need to sleep. Automated trading solves the problem. (I simply start my trading program during the evening and it trades while I sleep.)

Automated trading used to be restricted to professional organisations with strong technical resources. Now, using appropriate software, retail customers with no technical background can also automate their trading activity.

The switch to automation signalled a new phase of my trading career. For the first time, I began to see real trading results matching my simulation results... the fact is that it is not too difficult to discover a strategy with a winning edge, but it is incredibly difficult to implement it successfully over a period of months and years without the benefit of automation.

Automating your trading plan is the embodiment of working smarter, not harder. Your performance is improved, and you save countless hours each week chained to a computer.

No comments:

Post a Comment