Archive for May, 2007
Automated Trading: Pros/Cons
By Marek W. Stupka | May 30, 2007
Some traders like to spend lots and lots of money on automated trading robots. They say they don’t have time to watch the charts all the time…
Yes, there are pros to having a nice little trading robot patiently waiting in the quietness of your home or office desk, and do all of the hard work for you. One of them is - stress-free life. Another one is - more time to do your job. Yet another one - tons and tons of easy money! And the list doesn’t end here…
But what about the cons? Well, one of the most utterly important cons undoubtly is that no such money-making machine has ever been devised!
Several days ago we’ve had a discussion at Gepard Investments, Inc. if it is a good idea to actually program THE CANAAL - one of my proprietary Trading Systems - within a trading software application designed specifically for this purpose (e.g. the Trade Station), and so to actually make our trading fully automated.
To put it simply, the results came out negative.
Let me give you reasons why I DON’T believe that (any) automated trading can bring consistent results.
One great legend of trading once said that “the trading robots can never be successful because there is an intangible element to successful trading”. And it’s true. Whatever your trading strategy, if you strip it down to a sequence of fully automated procedures, it just never works in black numbers. It might - for a week or two… But never over the long term.
Now, there might be trading software companies - and their sales reps - that would try to convince you otherwise. They would offer to you their “surefire” trading automats, supposed to turn your few thousands into few millions over just a couple of months. And they would put very exotic price tags on their products. The ugly truth is, actually, that the very essence of these software companies’ marketing efforts speaks against their own postulates.
Just give it all a serious thought. If there was a machine that can make you money, consistently and over the long-term, would they be selling it to you???
The answer is NO!! The more people knew about how the money is automatically made, the less would be the chances of success for such a moneymaker! The successful FOREX automat software developers would, in fact, do the very opposite – they would hide their powercomputers deep down in the underground of their office buildings, and they would put all their live savings (and even borrow every damn cent they would get from their friends, and form banks) to produce loads of that easy cash month-in and month-out…
Well, I believe you see now that trading automats producing consistent profits only exist in the traders’ imagination.
Topics: Automated Trading | No Comments »
Using “Exotic” Time Frames
By Marek W. Stupka | May 21, 2007
Some traders like to trade on “exotic” time scales set in whole numbers down to one minute (e.g. 23 minutes). They want to be “ahead of the others”. Are they?
Few days ago, I met an enthusiastic option and currency trader who, after inviting me to visit him in his luxury apartment, started a very interesting discussion about life, girls and trading. Over the cup of fine tea, he revealed to me that the true secret to his trading is using time scales set few minutes “shorter” than what the standard scales are.
His reasoning was that he has learned this technique from an experienced trading teacher, and, basically, that by using the “exotic” scales he sees well ahead of the other traders what is really going to happen in the markets!
Well, after asking him what time scales he is using exactly, he answered: 23 minutes and 4 minutes. No other scales allowed! As soon as I inquired about the strategies he bases his trading on, and about the consistency of his trading results, he couldn’t really answer my question. So I suggested to move our tea cups to his study room, and to let him demonstrate how he likes to trade.
After he finished the demonstration, my original suspicion has been fully confirmed. The guy’s “pride” are his “exotic” time scales. The real quality-determining factors of his trading, e.g. the technical tools, tactiques, and strategies used, the trading discipline, written Trading Plan, etc. - are considered “not that important”.
Well, as I started to comment on his trading style, I was as clear and straightforward as possible about the importance of sound, back-tested trading strategy on the trading results. “It does not necessarily matter what time scales you are using. Much more essential to your monthly track record is the strategy you apply in your trading. As far as the time scales are concerned, I personally like to watch the same charts as the trading professionals on Wall Street and Fleet Street. These scales are: 15m, 1h, 4h, 1d, and 1w. If you look at something else, it is important for you to realize that you’re looking at the same price action as everybody else, only rendered in different candlestick time intervals, and thus your trading charts might be distorted against the charts of the pros (not just moved ahead in time, but truly DISTORTED!).
As I tried to prove the statement above to him by explaining the math behind how the charts are plotted, he didn’t want to hear. He said that he’s been trading options and currencies for 7 years, and he is not going to change his trading style now. “Well”, I teased, “it is one finely furnished apartment you have here! Does all of this come from your trading proceeds?” The man just vaguely turned his head, what could be interpreted as yes, but also as maybe not. “May I see your track records, then?”, I deared to ask. And I instinctively knew what is going to happen. The answer just never arrived…
I have been teasing this guy, since I know that he is a sought-after psychologist, and all of his wealth comes from this profession. He only trades part-time, in-between his psychology sessions, with very small money. Trading is sort of a good sport for him, almost like casino gambling. With FOREX he doesn’t even have to leave the room!
See, if FOREX equals gambling in your lingo, you are on the right track to lose all of your money as you’d do at the Roulette Royal. If, on the other hand, you treat FX like a good business, it will reward you with good business results!
Topics: FOREX Trading Systems | No Comments »
Carry Trade Throttling Up!
By Marek W. Stupka | May 11, 2007
In the April’s Trader’s Corner, I presented yet another simple technical analysis of the USDJPY weekly chart with continued reversal move. Check it out now!
Scoring again! Net profit 200pip, and still trading conservatively! We have just gotten loaded!
Anyways, as I have already explained twice, USDJPY is a referential pair for the whole carry trade basket. You should also check the price action of other Yen crosses, e.g. the GBPJPY, AUDJPY, NZDJPY, and CHFJPY. Judging by their development, what we see now from the carry is only the “getting started” phase…
There’s still more to come as far as profiting from the carry trade appetite of the hedge funds on Yen-denominated currencies is concerned!
Nota Bene: Once again I have to stress, that what you see above is in fact a very, very limited version of the periodically updated Technical Analysis planning available for my 1-on-1 Students. The information provided here is definitely not intended to form a real trade suggestion, or a signal, and is presented to you as incomplete, and advisory only…
Topics: FOREX Trading Analysis | No Comments »