The Big Problem is that Trading Markets of any kind is VERY DIFFICULT or one may say IMPOSSIBLE. That means, stock picking, forecasting the market, is more about luck than skill. That doesn’t mean investing has to be. The problem is that markets are subject to weird and random movements that are impossible to predict. Here’s a breakdown of some of the big problems traders and investors face when making trading decisions for themselves.
Fraud and misleading sales tactics
Traders or Magicians? We all know Magic isn’t real. Well, many of the results you see online are faked. How do we know what system is for real, or not? Investors are left with their own judgement to decide if a trader is a very good trader or a very good Magician. Madoff was able to fool millions in a regulated environment. There are a lot of skilled con-men out there, how is a novice supposed to separate the diamonds from the rock? How does one know who is honest and who is not? Are any of these systems verified? What if the ‘reviews’ are faked?
Are you a computer expert?
Do you have a degree in Computer Science? If not, installing robots is probably not for you. Even with the instruction manuals and free resources provided by most brokers, situations can occur which require the end user to become involved in the process. For example, you need to be able to setup a Virtual Private Server (VPS) using Windows Remote Desktop (RDP) and copy your robot to the VPS. Then you need to ensure your license file will allow trading on that VPS or MT4 account where it is locked to. Then you must choose settings for the robot that are profitable – which is like trading – an art by itself. Finally, choose the pairs you want to trade, and monitor that all goes well. It is a rewarding experience however if you do not have the time or computer skills required it’s probably best to avoid it, because any mistakes in the process can cause losses and thus cost you real money!
Do you have $10 Million in the bank?
Do you have a Magic Donkey that excretes money? Or you are a 3rd generation Rockefeller? If not, you are probably going to encounter regulatory problems at one point in your trading or investing, whether you are a US Citizen or not. Perhaps the manager you like lives in the US, or is only offered at a Swiss broker, and you aren’t eligible to open an account. Or perhaps the strategy is ‘ECP Only’ and has a $1 Million USD minimum to discourage regulatory problem clients. Or you actually are an ECP but you don’t want to deal with FATCA and other compliance. Regulations have killed the Currency Trading Business. But regulations don’t apply to you if you are an Eligible Contract Participant (ECP) which means you are either an institution yourself or have $10 Million lying around.
You see the opportunities, but how to capture it?
If you’ve ever looked at a simple Bitcoin or Euro chart you probably have seen there are huge opportunities and huge risks in trading Currencies. If I had bought there, and sold there – I would have made a ton! (you’re thinking) – But of course – how do you know when to buy and sell? Here lies the problem – where there is huge opportunity it comes with huge risk. There was a time when BTC/USD looked like it would go nowhere. Then suddenly, it exploded. A few traders got rich. And now the whole world is catching up.
What's the Big Problem? ..A Summary
Bitcoin exposed the world to the advantages of Currency Trading. In no other asset class are returns like we have seen in BTC/USD possible. Of course, what goes up must come down – so there are just as big risks in Currency Trading. Nonetheless, Bitcoin has attracted the eye of investors globally, and deserves a closer look. So the big question everyone is asking, how do we replicate the results of those who bought BTC/USD at $1? Unfortunately, the answer is that’s not possible. The run up from $1 to $20,000 was a once in a lifetime situation. And the chances of it happening again in another Crypto currency are also highly unlikely. So just accept it, and move on. There’s lots of opportunities in Crypto!
The problem is that even with the explosive returns, an investor would have had to buy and hold for several years. This is not as easy as it seems. As the price goes up, the tendency is to sell and take the profit. But when to sell? That’s the key. Like anything, it comes down to trading. Stock picking is hard enough, but once you’ve picked your stocks you want to invest in, then you must pick when to buy and sell. This is known as ‘entry timing’ – and when you have a profit, you must at some point ‘sell’ which is ‘exit timing.’ All this must be done with clockwork precision or else you won’t capture the whole move. Sound difficult enough? That’s not all.
Even if you are a PhD Wharton genius and are able to successfully do this, imagine having to repeat this success 100 times or 1,000 times – that’s what’s necessary to earn consistent profits with such a methodology. The point is that, even if you are able to perform abnormally well, are you able to do it week after week, month after month, year after year? There are hundreds of cases of traders that were able to create positive returns for 10, 20, and 30 months in a row without any losing month, only to be followed by a huge drawdown. Trading is taxing on the brain, body, and mind. A skilled trader is subject to all these flaws no matter how superior he may seem to be. Continued positive returns created manually are an additional debilitating psychological factor; the trader may then be subject to the “Superman Complex” and may make bad decisions because he thinks he can only make good decisions.
The solution to the human problem is to use computers. This may sound simplistic, but it is. Einstein’s theory of relativity is boiled down to the simple E=MC2. Genius is the simplicity. The use of computer aided trading methodologies opens up a universe of possibilities not possible to achieve by a human. There are thousands of approaches to developing and building automated, algorithmic systems so this argument is not to say that all algorithmic systems are good. But they have many, huge advantages – the most obvious being they don’t get tired and don’t make mistakes. They are capable of being back tested and forward tested (although this by itself isn’t an indication of how a system may perform, it is a lot more information than you can derive from a human trader).
Algos come in many shapes and sizes and are offered sometimes through hedge funds or managed accounts that have extremely high minimum account sizes (such as $1 Million or even $5 Million). Retail platforms such as Meta Trader opened a development platform to all, which led to a mass market approach to algorithmic development. Since then, algorithms were no longer the sole property of rich Elite hedge funds. Of course, the majority of systems created by amateur hobbyists are junk – but not all. The key difference to understand, when an investor is choosing an algorithm – you are evaluating the methodology, not the market itself. Types of methodologies include trend following, swing trading, statistical arbitrage, momentum, artificial intelligence, technical analysis, carry trade, and many others.
FXBOT.MARKET is designed specifically for self-traders who want to trade robots with a specific methodology. With our FX Trade Bot product, we copy the trades of the robot directly on to your account with our Botomation technology, ensuring consistency and reducing trader error. You can still control the robot as you want; set the leverage, opt-out of specific trades, reverse trades, close all trades, or modify target levels. Or you can simply step back and watch the robot do the work for you – it’s all in your hands.
Is there a downside to all this? Of course there is, a big one – the robot can lose. That’s the nature of investing. A good investor tries to have more wins than losses. As any investor will tell you – it’s impossible to win all the time. The idea of algorithmic trading is that it puts the probability in your favor. By using a quantitative, rather than a qualitative approach, it’s basing the strategy on statistics, rather than opinions.
FXBOT.MARKET is free to register – we also offer free market tools such as market data, market clock, market calendar, discussion forums, and more. If you choose to buy or rent a robot, it is at the terms of the seller. FXBM takes 25% as our fee. We aren’t a broker and never will be – you are free to trade on the broker of your choice. Currently our Botomation Copy Bot supports more than 2,500+ brokers on the MT4 platform. We put you in control – after all – it’s your account.
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