Automated Trading and Economic Recovery
Some people think that the economic turmoil is just beginning. Others think that the worst is behind us, the government stimulus worked, and we are on the way to recovery. No one can predict with certainty which way the economy goes, but we need to prepare ourselves to succeed financially, regardless of what happens.
How can we do that?
There are many ways. One way is through trading. Another way is by investing. Not buy-and-hold investing where our account value goes down with the markets. Instead, it’s about finding a way to invest so that falling financial markets do not decimate our wealth. One example is investing in real estate. Even if the value of the property goes down, if we have positive cash flow, we never need to sell.
Another way to find a good investing strategy is through Automated Trading. Automated Trading is a combination of stock (or other asset) trading and investing. Stock trading is rarely thought of as investing because most traders lack consistency and are really just gamblers. They buy a stock and hope that it goes up. When it goes down they hold on to it and are very reluctant to sell.
Automated Trading systems are different in that they create consistency and predictability. Automated Trading systems always make the same decision under the same conditions. Since they always make the same decisions, they tend to perform more consistently, and to some degree, we can predict the trading results in the future. There is no guarantee, but at least there is some chance that an Automated Trading system will continue to perform well in the future, if it has performed well in the past.
Automated Trading systems do not require us to know which way the economy or the markets are going to go in order to make money. Automated Trading systems detect trends and trade to profit from them. For example, if the system detects that a certain asset is going up in value, then it can take a long position. When it detects that the trend has changed, it can sell the position and generate a profit (in this case).
Many investors and traders are really just gamblers hoping that whatever they invest in will go up in value. When the market moves against them, they tend to hide and hope harder. At some point, they can’t take the pain any more and sell their position for a massive loss. In the last few months, this loss was so massive that many would-be retirees had to keep working.
Automated Trading systems have the potential to avoid this human drama. They can make money regardless of which way the market goes. They eliminate the human emotions that cause most traders and investors to lose money. That’s why we believe we are on the tip of the Automated Trading revolution.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
