Trading Pal Blog

What can you expect from an automated trading system? Is it any better than flipping a coin? Contrary to common belief a computerised trading system based purely on technical analysis can pick a reliable number of good trades.

How can that be? First of all let's be selective. Not all instruments that you find to trade are profitable. That's in fact a benefit because you have a limited amount of capital to trade with - therefore you have to be quite specific about what you choose. Individual stocks especially those with a small capitalization are to be left alone unless you have industry knowledge. Indices and very large stocks behave well under the spotlight of technical analysis. Even better still commodities are found to be the best. Recently a rare metal such as palladium provided close to 100% returns in just 9 months. Imagine doubling your money in one year. (We're talking about April 2010 here).

A trading program doesn't care about a company balance sheet (or what is left of it after the creative accountants have done their magic on it.) As you have heard: "Everything you need to know is already factored in the price!" An automated trading system doesn't fidget whether or not to be in or out of the market. It is always in the market reversing from long to short and back again. It does not give in to market emotions but it does take advantage of big swings in the market by being bold enough to change position early in a move.

You might think such a system is the prerogative of big hedge funds who can afford to hire scores of quantitative analysts. Not so. There is such a system available for a small subscription fee. Trading Pal publishes their results daily. It runs on a 9 months rolling window of data. For each instrument traded a chart and a log of trades with a tally of profits and losses is available.

Even though there is still quite a choice of instruments to choose from people tend to trade in an industry or market they are familiar with. They mentally recall the last high or the last low over the last 6 months. Nevertheless comparing your own trades with what Trading Pal came up with can be quite a wake up call to the shortcomings of your own ad-hoc trading methodology (If you can call it that when all you do is give in to your emotions.)

Add Comment