Ever since the home computer and online trading made their debut, there has been a steady trend toward automation andor software trading programs designed to minimize the decision process traders make in preparation to initiate a trade. In a previous article, I outlined my feelings about fully automated trading and explained I was not favorably disposed towards ceding control of my trading to my computer. A step down the evolutionary ladder of computer programming brings us to consider whether software packages designed to assist a trader in choosing trades is a good idea.
There are some obvious considerations in choosing a software package to assist you in your e mini trading endeavors. I suppose the most important consideration would have to be the quality of the software program itself. I have used a variety of software programs to assist in my trading and found a wide range of quality and effectiveness. So it’s a little more difficult to evaluate the trading software industry as a whole. There are good programs that work well, and there are programs that do not perform as advertised.
And that brings us to one of the toughest problems for trading software writers to conquer; a program may work well in one market environment and perform miserably in a different market environment. To be sure, I’ve yet to see a trading software program that performs anywhere near adequate in choppy, consolidating markets. Along the same line, I don’t know many traders who perform well in this type of market either. Choppy market conditions are among the most difficult to trade; my trading style, for example, has strict definitions on what is actually market noise and I avoid trading during these periods.
Do you really need a software program
The answer to this question is an unequivocal no. I would contend that learning to trade is far more valuable investment in time and money than purchasing a trading software program. But it’s my observation that many traders are uncomfortable trading without a program spitting out buy and sell signals. I suspect the reason for this dependence upon trading programs is due to a lack of confidence in a traders skills. In saying that, I am not inferring that traders who use software programs don’t have adequate trading skills, most do. But often they lack the confidence to rely upon the skills they learned, and a software trading program can be used to supply a backup to some of the decisions they make about trading.
But some programs are very helpful, and I submit that using a trading software program that is of high quality can be an asset to trading the e mini contracts. The problem lies in choosing a program that works as advertised. Just this morning I was reading about a program that promised 90% accuracy in choosing trades. Of course, this is a fairly suspicious claim as most trades are a function of probability, and it is my belief no set up can be found that is 90% profitable. So exaggerated claims of accuracy are a red flag, in my opinion. On the other hand, there are a couple of programs that I have used throughout my career that are extremely accurate, though nothing approaching 90% accuracy. These programs are available commercially and are marketed by well-known trading educators andor traders.
Even the best programs require some skill on the part of the trader, though. As I said earlier, there are certain market conditions in which no program distinguishes itself, and it’s up to the trader to identify those conditions and ignore the trading signals generated by the software program. The e mini’s often spend days and consolidating patterns and good setups are hard to come by. A trader at using a software program must be aware of the strengths of his or her trading program and utilize it accordingly.
To sum up, there is a wide range of quality and accuracy in the trading programs currently offered by vendors, and I suggest a trader extensively research the actual record of a software trading program before making the sizable investment most software programs require. You don’t necessarily need a software trading program, but a quality program can be an asset to your trading arsenal. And finally, when using software trading programs it is essential to understand that there are market conditions that cause programs to give false or unreliable buysell signals and recognize the inherent weakness of the program.
Tags: automated trading, different market, evolutionary ladder, market environment, software program, software trading, software writers, steady trend, strict definitions, trading software