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Algorithmic/automated trading and emotions

  • #1
  • First Post: Jul 7, 2020 3:35pm Jul 7, 2020 3:35pm
When I started Algo trading I thought there won't be any emotions involved and I'll be a free from watching charts. I can't say "sit in front of computer" because that's my profession. It pays my billsJ.

Now even though I have my Algos running 24/7 buying and selling Forex but I don't stop checking App, tradingview or login directly to Oanda web portal. In fact, sometime, I get up in the night just to check if my Algo has taken trade or how much down it is. At one time in past I have closed my trade when 45 pips down only to realize that if I would have kept that trade I would have made 20 pips. My Algo puts stop loss at 50 pips but well, my emotions don't. In addition, this is when I'm doing demo trading. I have recently started live trading with small account. So far, I'm able to control my emotions in live as account size is only couple of hundreds. To be honest it has not gone down 40 pips. If it would, don't know what I would have done. Will see.

By end of the year or beginning next year my plan is to go big.

I want to know how other algo/automated traders are coping with emotions. Thank God, I'm not a full time trader. I couldn't image what I would be doing then.
  • #2
  • Jul 8, 2020 3:48pm Jul 8, 2020 3:48pm
Yes, I'm also exploring long term strategy in demo. It worked most of the time but because of bad risk management I'm down. Working on it...
  • #3
  • Jul 8, 2020 4:38pm Jul 8, 2020 4:38pm
Quoting HeyYou
{quote} well.. I trade stocks and I was also down 20-30% during the coronavirus.. but now I'm up 5% or something. IMO trading should not be hard at all, it's in fact very easy when you find something that works for you.
Actually, I also trade stocks and use Alpaca REST API. It is commission free. During the coronavirus lost around 45%. Recovery is going on but still 10% to go. Algo uses mean revision strategy and have many rules for risk management. However, they all failed during COVID-19 crises. Now Algo has a circuit breaker type of risk management strategy. It keeps track of balance and stop trading the moment loss reaches the threshold. I will have to start Algo manually if it hit threshold.
  • #4
  • Jul 8, 2020 4:59pm Jul 8, 2020 4:59pm
Well, I would not say a ‘lot’ because that is the only thing which is manual. It has not yet hit since I implemented it after the crises. Fingers crossed!
  • #5
  • Jul 8, 2020 6:31pm Jul 8, 2020 6:31pm
Quoting HeyYou
{quote} k so, there's a lot of discretion involved only if you're losing ....a lot... !!! think about your plan before it's too late.
true only if ‘a lot’. Thank you for your advice!
  • #6
  • Jul 27, 2020 12:40pm Jul 27, 2020 12:40pm
No matter what approach you take in the market, you have to keep things under control. I think it's really right and I like that even passive earning formats are now more controlled and more relaxed. And maybe this is the reason why passive formats have become more profitable over the last year, even though the market this year is complex and ambiguous. It's cool that you share your observations and results because it serves as a certain motivation both for you and for the people who read you. Because in my opinion trading is a very lonely profession, and sometimes we just need to share our emotions, observations, thoughts with someone.
  • #7
  • Jul 27, 2020 1:07pm Jul 27, 2020 1:07pm
Algo trader is your method systematic in every way or there is some discretionary factors embedded. Emotions suggest discretionary factors. Ok I can come out here hmmm no lets stay a little longer etc.

Being there to watch is suggesting that you have concerns and probably not fully confident to leave it alone. When it comes to the point where it consistently takes you to the bank, then and only then you will have a level of comfort.

When its a news strategy you may need to watch but as soon as it is concluded that it does what is required it should be left alone.

Even now I can't help to look but when you gain the confidence that the day, week or month will end in profit you will be more at is... all the best.
R:R "Percentage Focus"
  • #8
  • Jul 27, 2020 1:25pm Jul 27, 2020 1:25pm
Quoting AlgoTrader4
In fact, sometime, I get up in the night just to check if my Algo has taken trade or how much down it is... I have recently started live trading with small account... So far, I'm able to control my emotions in live as account size is only couple of hundreds. By end of the year or beginning next year my plan is to go big. I want to know how other algo/automated traders are coping with emotions...
Now Algo has a circuit breaker type of risk management strategy. It keeps track of balance and stop trading the moment loss reaches the threshold. I will have to start Algo manually if it hit threshold...
Well, a circuit breaker type of risk management can help to avoid blowing the account in a short time. After switching the algo back on, it does not mean the algo won't hit the circuit breaker loss over and over again. Have you back-tested the idea in similar historical situations to adjust the risk management concept?

I am not the first one saying this in trading, if the trader can't sleep worrying about the trades, then his position size is too big for the account. Have you considered adding a position size algorithm in your strategy and back-tested it?

Good trading to you.
Bill
  • #9
  • Jul 27, 2020 11:03pm Jul 27, 2020 11:03pm
Quoting calaxcorp
{quote} Well, a circuit breaker type of risk management can help to avoid blowing the account in a short time. After switching the algo back on, it does not mean the algo won't hit the circuit breaker loss over and over again. Have you back-tested the idea in similar historical situations to adjust the risk management concept? I am not the first one saying this in trading, if the trader can't sleep worrying about the trades, then his position size is too big for the account. Have you considered adding a position size algorithm in your strategy and...
Great advice, the best backtest is done via mt5, real tick data, slippage, multi asset and the works.
It's not easy accomplishing hands free, emotionless trading, nevertheless I believe it is still possible.
R:R "Percentage Focus"
  • #10
  • Jul 28, 2020 12:35am Jul 28, 2020 12:35am
Fact is that we can't all do the same thing. the market would not exist.

What works for me may not work for you. That's why I tend to avoid Giving/Receiving advice.
  • #11
  • Edited Jul 29, 2020 12:04am Jul 28, 2020 12:59am | Edited Jul 29, 2020 12:04am
Quoting HeyYou
What works for me may not work for you.

...and I mean psychologically.
For instance I'm comfortable investing long term, but some people find it very stressful.

I find taking many small losses very stressful..
  • #12
  • Jul 28, 2020 2:59am Jul 28, 2020 2:59am
i don't use automated trade.
I only use one analytics program that I have put together based on different criteria.
it makes my job a lot easier because it rules out the possibility of human error.
  • #13
  • Jul 28, 2020 5:36pm Jul 28, 2020 5:36pm
Quoting PrinceJ58
Algo trader is your method systematic in every way or there is some discretionary factors embedded. Emotions suggest discretionary factors. Ok I can come out here hmmm no lets stay a little longer etc. Being there to watch is suggesting that you have concerns and probably not fully confident to leave it alone. When it comes to the point where it consistently takes you to the bank, then and only then you will have a level of comfort. When its a news strategy you may need to watch but as soon as it is concluded that it does what is required it should...
My method is completely automated. Recently I have made update to my circuit breaker risk management strategy. Now there are two circuit breakers, one for a day and another for a week. If daily circuit breaker hit then next trading will begin after 5 pm EST. Same for weekly. If weekly circuit breaker hit then next trading will start from Sunday evening.
So far in my live and demo trade I haven't closed any trade manually.
  • #14
  • Last Post: Jul 28, 2020 5:43pm Jul 28, 2020 5:43pm
Quoting calaxcorp
{quote} Well, a circuit breaker type of risk management can help to avoid blowing the account in a short time. After switching the algo back on, it does not mean the algo won't hit the circuit breaker loss over and over again. Have you back-tested the idea in similar historical situations to adjust the risk management concept? I am not the first one saying this in trading, if the trader can't sleep worrying about the trades, then his position size is too big for the account. Have you considered adding a position size algorithm in your strategy and...
Good point and thanks for trading wishes! As per my back testing results my strategy has recovered from 80% drawdown. That has given me confidence. However we all know the difference between back test and real trading. Position size algorithm is next in my to do list after circuit breaker testing in demo and live.
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