This is the second in a series of posts about how and why I started down the path of automated trading. Here’s the first post in the series. If you’re interested in automated trading, check out our Automated Trading Robot which is available in beta now. It’s the best and easiest way to start automated trading – absolutely no coding required!
I thought about trying to trade additional manual systems, but I didn’t want the system to take any more of my time during the day.
For a long time when I thought about automation, I was always thinking about it in terms of automating my manual system which would be quite difficult to mechanize COMPLETELY (although not impossible). In fact, I’ve automated about as much of that system as I possibly can (there are a couple more aspects that I’ll be able to automate soon). But the fact remains that my manual system still requires me to manually submit trades.
I’m not sure why it didn’t dawn on me until somewhat recently, but I never considered adding additional strategies that were designed from the beginning to be automated strategies rather than retrofitting a manual strategy.
Around this time I was getting a handle on my manual trading drawdown and could see the light at the end of the tunnel. I knew at this point that I would start working towards at least a couple automated strategies.
There’s nothing like a drawdown to motivate you to improve and that’s exactly what it did. Also, since my manual trading is back on track and as good as its ever been, I’ve found that I need to put forth some effort to stay motivated to come up with automated strategies (since I don’t NEED it now). I also am realizing that this is the perfect time to brainstorm new strategies – when your trading is going well. There’s no pressure and there’s plenty of time to come up with something that works.
A few months ago I made some pretty radical changes to my manual trading. Instead of looking for trades throughout a large part of the trading day, I began concentrating on a much smaller portion of the day.
This worked really well because it is much less work for me during the day. It’s not that there weren’t setups to be found throughout the day, it was just that it was too much work for me to focus on the market for that long to try to find them. The performance metrics in StockTickr made it clear to me that although the trades were profitable, they weren’t profitable enough to justify all the work I was doing to find them.
This is another way that an automated strategy really shines – a computer can watch the market for setups all day long and it doesn’t get tired, hungry, lose concentration, and its eyes never start hurting.
Once the automated trading system finds a trade, it doesn’t make order entry errors, position sizing errors, and it always puts the stop in the right place. In fact, think about all the mistakes that human traders can (and do) make when trading. Almost all of them are eliminated by automation.
An automated trading system can also make several trades a second if it has to – something a human simply isn’t capable of doing manually.
For the next post in the series I’ll point out another huge benefit to automated trading. Hint: It’s got to do with the person sitting in front of your trading screen.