Trading
software allow market participants to automate day or swing trading
or investing strategies.
Indeed,
one is delegating trading executions to a trading algorithm.
However,
there are pitfalls one ought to surmount.
1/
Building flawless trading software
The
first pitfall is the validity of the software. It is the foundation.
One should always consider the following when building a trading
software:
a/
valid trading software do not violate
the
three market patterns,
b/
robust trading software always trade the price action instead of the
technical indicators,
d/
all entries should be on the edge,
e/
users should have the competence or at least a self explanatory user
guide,
f/
and
users
also ought to have a minimum support or be able to contact the
support team.
2/
Trading Software Dependency
Quite
often traders purchase trading software, and expect trading
software
to trade for them. In most cases, traders usually purchase trading
software with a high winning rate, and expect them to do the
hard-work. Nevertheless, many trading software have
failed
the validity test. Therefore, traders who place their faith in them
may lose substantial amount of money If they have no ideas about how
to day or swing trade with
the trading software.
In
many cases, those who purchase a trading software for the sole
purpose of making buck, will spend a lot of money just to get their
hands on that miracle working trading software. Truly,
there are no miracle working trading software.
Normally,
a competent trader
can buy a trading software to assist him or her in trading, but he or
she does
not
wholeheartedly rely upon the software. A competent technical
trader will
quickly differentiate a useless trading software from a top one. He
or she can also figure out what is hidden in the black box in some
cases.
A
trading software is an essential trading tool for big financial
institutions. In this instance, most financial
institutions
would develop their own trading strategies. Subsequently, they will
trade them for a long time before converting them into a trading
software. They would also test and refine those strategies to the
point where they would be able to identify the following:
1/
what
are the most suitable financial securities,
2/
what
is the most favorable time to use the software,
3/
what
are the best trading signals,
4/
and
most importantly how to manage the risk.
Trading
software misuse
A
trading software should be specific.
For
example, one can build a day trading software, Forex day trading
software, blue chips
stocks day trading software or Apple stock day trading software. Each
automated trading tool is unique. One should not utilize a stock day
trading software for Forex day trading or an Apple stock day trading
software for day trading commodities.
End
User trading software trial time
After
purchasing a trading software, it critical to learn how
to
apply it. It can take up to two weeks before one grasps
how it works. During the trial, one can contact the provider if
possible to clarify any confusions that may arise. One should also
use
a
demo trading account instead of a real one to avoid wiping out the
trading
account
before one masters the software. One should not be shy to ask
questions or request assistance.
If
at
the
end of the trial, one is satisfy with the performance, the only thing
one may have lost would be the cost of purchase instead of the
trading account.
Trading
software believers
Eighty
per cent winning rate trading software would not always deliver that
winning
rate success.
It may deliver between 60% and 100% winning rate or in the worst case
scenario
between
50% and 80%winning streak.
Note
that
in
each case the risk management will reflect on the size of the profit
or loss. Therefore, one should not expect
a
trading software to perform at its highest level at all times.
Moreover, a novice trader must not expect the same results as a more
experience one.
Remember
the most important trading tool is the trader not the trading
software.
Indeed,
personal
input, knowledge and trading skills count when one is using an
automated trading system.
Monitoring
The Trading Software
One
should always be ready to monitor the trading software. It does not
matter whether it is the most powerful trading software. On
occasions, one may have to shut it down or override trading signals
due to the market environment or price action distortions.
Moreover,
a high performing trading software can become obsolete due to
dramatic market changes. For example, market leaders may completely
change their trading activities or new major market players may
change the trading
game.
For example, in 2008 the financial markets
have
profoundly changed due the influence of the new market players: high
frequency trading firms.
A
surge in automated trading has created a new playing trading field.
As
the financial markets are constantly changing, it becomes essential
for trading software users and builders to take
into
consideration the new parameters or to stick to the fundamental
market principles or market stable data.
It
is always naive to assume that all one needs is a powerful trading
software. Powerful trading software are more beneficial to those who
build them, and market participants who understand how the financial
markets work.
A
trading software like any other tool will not do the hard lifting
work, but empower those who already know how to use it.
Similarly,
a useless trading software will not provide any meaningful help to
the user because it is fundamentally flawed.
It
does not matter whether it is insanely expensive or produced by a
reputable person. If the software is flawed, dump it or build a
better one that does not ignore the basic market principles.
It
is also a mistake for a beginner market player to spend thousands of
dollars on a trading software, and hope that it is all well. Yes,
a powerful trading software will help to a certain degree, but help
even more, if one has more experience in the financial markets. One
should invest more in the ability to invest or trade more profitably,
unless one has gotten the experience, and looking for an automated
assistance that one can control. Never use a trading software that
you can not control or understand. Always be in charge because it is
your money or reputation that is in question.
