Why Automated Trading?

May 16th, 2008

I’ve had several folks ask about the automated trading strategy that I’m developing. Here’s a summary of where I am in the development of my automated trading. I won’t give specific details about the actual trading strategy because I think that would be a disservice to anyone reading this. What I will tell you is why I started down the path of automated trading, how I came up with a strategy, the steps I took to get it “tradeable,” and the software I use to do the actual trading.

Why I Started Considering Automated Trading

I’ve been day trading for coming up on two years now. During that time I learned a lot about my psychology, my trading edge, and my risk tolerance. Over time, I refined my strategy and became more and more consistent with my results. I’m still refining my strategy – this market is ever-changing and the strategy needs to evolve over time.

What worked for most months in 2007 stopped working for me in mid-November 2007. It took a couple months of simply breaking even and even a slight losing month to realize how I needed to change. My manual trading is back on track and I feel my trading is stronger as a result of that drawdown.

During that drawdown, I was very motivated to develop more profitable strategies to trade that could smooth out my returns. Hopefully these new strategies could take up the slack on days where I lost money in my manual trading. There’s nothing like a drawdown to bring out the creativity in you!

I also wanted to find something that traded more frequently. You might think that something more frequent than my manual system is just “too many trades,” but anytime you find a strategy with a positive expectancy you should try to trade it as much as possible without hurting the overall results of the system. Also, my manual trading system uses a relatively small amount of buying power in my account, so there’s plenty of room to trade at least a couple more systems.

In the next post I’ll talk about why I started down the path of automated trading and not an additional manual system, which I have considered as well.


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    May 21, 2008 @ 5:35 pm

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