Advantages of Mechanical Trading Systems
Currency traders use different approaches in their trading. Majority of successful traders use self developed mechanical trading systems. There are always advantages and disadvantages of different trading systems. The majority of unsuccessful traders depend on discrete trading method.
Many traders use their own developed trading systems. There are many actively developed trading systems for sale as computer programs also known as Expert Advisors or Robots. Theses robots vary widely in prices. It can be from a few hundred dollars to a few hundred thousand dollars.
The significant advantage of these computer programs is that they generate signals. These signals can be used by the trader for trading. Sometimes these computer programs are developed for a certain bank or a corporation.
The discrete trading method is used by many traders. It is like an artist trying to adapt to different market conditions using flexibility and tactics corresponding to the particular market condition.
In case of a discrete trading method, the traders mood and health can greatly affect the outcome of each trade. The main disadvantage of the discrete trading approach is due to the stress factor influencing the trader, the unstable trade results.
A mechanical trading system prevents the trader from quick adjustment of trade tactics and strategies under changing market conditions. However, it almost completely removes the influences of the stress factor. It also reduces the negative pressure on a trader which is obviously a big plus.
A mechanical trading system also doesnt allow the quick customization of the trading system in cases like the change of the account size. There are eight requirements that any ideal trading systems should fulfill. These conditions are:
1. A trading system should allow for the maximum adjustment to any traders psychological character and makeup.
2. It should be universal and does not depend on a particular market condition at any moment of time.
3. It should be simple, logical and depend on understandable ready to use elements and units.
4. The trading system should provide specific price signals for the trader for entry and exit positions some time in advance.
5. The trading system must allow some room for the traders creativity.
6. There should be some flexibility to modernize and adjust the trading system in accordance with the changing market conditions without violating its main principles and elements of the trading system.
7. The trading system should relieve the trader from emotional and psychological stress in trading.
8. It should be customizable. Different traders can use the same method with different account sizes and different risk/reward appetites.
A previously effective trade system could lead to negative results from change of market conditions. No one trading system can fulfill all these requirements.
Trade systems based on these requirements could be complex and adjustable. The only way of satisfying these conditions is through developing a diversified trading system. It can consist of a set of systems. These systems can be used as the basis for specific trade tactics at any given moment.
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in trading stocks and forex. Know These Forex Training Secrets. Learn Forex Trading.
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