August 29, 2007

I feel sorry for them, but let them be

Filed under: Uncategorized — by TraderMade @ 2:41 am

An interesting article about algorithmic trading I’ve found here.
An excerpts from it:

…………..Recent research from the Tabb Group indicated that in the USA, perhaps 60% of Investment Managers use or experiment with algorithmic trading……………

The majority of many friends and prospective clients i’ve talked with still believe that algorithmic trading is just a new, un-tested, un-reliable, too-risky approach to trade the market. The majority of retail investors still hold a strong believe that trading must be done using technical analysis that needs imagination to draw the trendline, need to have a sensitive-trained eye to spot the support/resistence levels, must use feelings in some extent, that the skill of an experienced trader is too complex to be programmed into a computer program, etc etc etc.. All these have resulted in a popular believe that algorithmic trading is an impossible approach for profitable trading, and it’s only for daydreamers.

Well, I feel sorry for them, feel sad for them, but since it is still –and will still be– the nature of the statistic is 95% of the players are losers, so let them be. They want to do this discretionary, well equipped with all those technical analysis mumbo-jumbo, and with all those fundamental analysis bullshit, so let they get what they deserve to get.

Recent research from the Tabb Group indicated that in the USA, perhaps 60% of Investment Managers use or experiment with algorithmic trading. I believe that they have a better chance to be belong to the winners group than all the rest of the crowd that I feel sorry about.



1 Comment »

  1. One of my friends even said to me that trading still need human touch/approach on the execution especially on forex market. Come on! Is that human touch is like drawing trend lines and use your own discretion/gut feeling when deciding to take a trades. You will just ruin the back-test statistic you’ve made. I knew that luck is involved in trading, but it is not the only reason that you profit from it.

    I think on forex market there is not many space for human touch It is the same if you do “stocks trading”. If you play it like medium term (several days, to several weeks) there would may be more place for discretions than forex market, but to my humble experience I don’t think that these news coming out about corporate actions an bla, bla, bla would affect that much in that very short term horizon (it does create spikes but I don’t think it is easy to profit from spikes). I would prefer to play it mechanically myself.

    If you do “stocks investing”, there is some plenty space for discretions considering the fact that we would play it bit long term so there is enough time space for the stocks itself to adjust themselves to the price target (play it like Warren Buffet. I think still he got a system, and that system also included his own analysis (discretions), that’s why he play on the business he really knew about, and avoiding the ones that he does not understand a lot).

    I guess we have to create some kind of persuasive articles that could gave prospective clients and fellow traders about what is trading is all about. I think why people think in such a way is because of their lack of knowledge and experience about trading itself and the understanding of mechanical trading.

    Pure mechanical trading is definitely the best way to trade (human is an inefficient decision maker. don’t let the market fool us around with that weakness)

    Comment by banggun — March 2, 2008 @ 11:17 am |Reply

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