Does Mechanical Trading Bring Peace of Mind? | Forex Factory

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Does Mechanical Trading Bring Peace of Mind?

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  • Does Mechanical Trading Bring the Trader Peace of Mind?
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  • #1
  • First Post: Nov 7, 2006 8:57am Nov 7, 2006 8:57am
I am a full time employee and it is almost impossible for me to stare at charts several hours a day to enter or exit trades. Therefore I decided to approach mechanical trading.

At first it was really hard, but eventually I managed to build a system that works for me. Now I feel that I'm relieved. I'm not afraid of losing a few trades consecutively as I know my system sometimes loses and sometimes wins.

I installed my trading station on a Virtual Dedicated Server (VDS or VPS) so I also have no problem with internet connection. I only check the status of my trades a couple of times a day. Actually I decided to reduce this number to a couple of times per week. Now, I have enough time to learn more about Forex and focus on understanding other systems and techniques and probably build a better system in the future.

What about you. What do you think about Mechanical Trading?
  • #2
  • Nov 7, 2006 9:17am Nov 7, 2006 9:17am
It defintely brings peace of mind, there's no question about it.
The problem is to find the mechanical system that will work (at least to some extent), if you developed one then good for you!
-soso
  • #3
  • Nov 7, 2006 9:49am Nov 7, 2006 9:49am
I'm hoping it works for me. I have chosen a mechanical system, but still screw up out of fear. I'm only 4 days into it. Right now I'm part of that 95% who loses in Forex. If I don't get my shit together and learn how to follow a simple plan without interference, not only will I have no pride, I'll lose my starting capital.
  • #4
  • Nov 7, 2006 12:36pm Nov 7, 2006 12:36pm
Quoting soso_beton
It defintely brings peace of mind, there's no question about it.
The problem is to find the mechanical system that will work (at least to some extent), if you developed one then good for you!
Thanks for your feedback. I believed I found a system that works for me. It's not a system to make huge amount of money in a short period but it makes money in long turm (or at least I believe so based on the backtesting, forward testing, and live trading for a while).

The set of EAs are already published on FF. You can download and test them if you wish. Click here for more info.
  • #5
  • Nov 7, 2006 12:45pm Nov 7, 2006 12:45pm
Quoting brick911
I'm hoping it works for me. I have chosen a mechanical system, but still screw up out of fear. I'm only 4 days into it. Right now I'm part of that 95% who loses in Forex. If I don't get my shit together and learn how to follow a simple plan without interference, not only will I have no pride, I'll lose my starting capital.
You might be interested in reading the following post:
http://www.forexfactory.com/forexfor...ghlight=losses

I encountered this problem a few months ago (losing 9% of my account in 3 trades). One of the answers to my concerns was that I don't know my system. The comment was right. Now I understand how novice I was. The truth is that if you know your system and Money Mangement rules you let your system go and even lose 25% or more of your margin.

Good Luck
  • #6
  • Nov 7, 2006 12:58pm Nov 7, 2006 12:58pm
Mechanical trading can certainly eliminates indecision once in a trade. Rather or not peace of mind comes with that is another story. You still have to decide when to trade the mechanical strategy, when to stop and when to tweak it. I think it comes back to persoanl style once again. Does mechanical trading bring YOU peice of mind?
Profit is where readiness meets Opportunity
  • #7
  • Nov 7, 2006 3:20pm Nov 7, 2006 3:20pm
Quoting FXopportunist
Mechanical trading can certainly eliminates indecision once in a trade. Rather or not peace of mind comes with that is another story. You still have to decide when to trade the mechanical strategy, when to stop and when to tweak it. I think it comes back to persoanl style once again. Does mechanical trading bring YOU peice of mind?
I would say, it brings me peace of mind and gives me the chance to focus on other issues (like learning new techniques, reading articles, and most importantly spend more time with my family).

However as you mentioned there are some trade related issues that you need to deal with (sometimes on a daily basis). For example whether or not to change the VAR, whether or not to stop trading on big news days, whether or not to close an open trade at the end of the week, and many more. You still need to work on those issues but hopefully with peace of mind.
  • #8
  • Nov 7, 2006 3:43pm Nov 7, 2006 3:43pm
Quoting FXopportunist
Mechanical trading can certainly eliminates indecision once in a trade. Rather or not peace of mind comes with that is another story. You still have to decide when to trade the mechanical strategy, when to stop and when to tweak it. I think it comes back to persoanl style once again. Does mechanical trading bring YOU peice of mind?
I agree with this. For some more experienced traders that have been doing this a long time, their descretionary systems that are far from mechanical just seem more logical to them. They find peace in mind knowing they make the decisions. I, however, find mechanical trading takes far less time once a system is developed, and I know I will make far less mistakes. Just being able to not second guess yourself when you place a trade brings me peace of mind.
  • #9
  • Nov 7, 2006 5:10pm Nov 7, 2006 5:10pm
Quoting twinchell
I agree with this. For some more experienced traders that have been doing this a long time, their descretionary systems that are far from mechanical just seem more logical to them. They find peace in mind knowing they make the decisions. I, however, find mechanical trading takes far less time once a system is developed, and I know I will make far less mistakes. Just being able to not second guess yourself when you place a trade brings me peace of mind.
I also think it helps with the emotion aspect of a trade.

If you have backtested your system and you are happy with the results then the only way to trade that system is in a mechanical fashion. If you then start to use discretion then the backtested results become useless...as you have then created a new 'system'.

I also think it is a very personal choice as well ...but for me I know a mechanical systems works best as there is never any hesitation to enter or exit a trade and therefore the 'emotional' aspect is controlled.
All I have to think about incase I hesitate are "the backtested results"!!!!!

The emotion of trading has been for me one of the hardest lessons!
Once emotion is under control then discipline and patience are easily found.

Cheers
Antra
  • #10
  • Nov 7, 2006 6:51pm Nov 7, 2006 6:51pm
Quoting Antra
I also think it helps with the emotion aspect of a trade.

If you have backtested your system and you are happy with the results then the only way to trade that system is in a mechanical fashion. If you then start to use discretion then the backtested results become useless...as you have then created a new 'system'.

I also think it is a very personal choice as well ...but for me I know a mechanical systems works best as there is never any hesitation to enter or exit a trade and therefore the 'emotional' aspect is controlled.
All I have to think about incase I hesitate are "the backtested results"!!!!!

The emotion of trading has been for me one of the hardest lessons!
Once emotion is under control then discipline and patience are easily found.

Cheers
Antra
Antra, I quite agree with you.
  • #11
  • Nov 7, 2006 8:06pm Nov 7, 2006 8:06pm
Quoting twinchell
Just being able to not second guess yourself when you place a trade brings me peace of mind.
This is exactly why I prefer mechanizing my trading. It keeps me from guessing about everything. "Oh I see I should enter here, but this is X where last time it was Y?" Even though X and Y have nothing to do with the rules of the system, I let them have an effect on the system, thus ruining the rules. Not so with our dear friend the EA from MT4 (or other such API's)!

The trick with mechanizing the trading is obviously to make sure that your mechanical counterpart is built on a solid and stable system that has been proven by hand and proven with forward testing.
  • #12
  • Nov 8, 2006 6:34am Nov 8, 2006 6:34am
Quoting Skyhook
This is exactly why I prefer mechanizing my trading. It keeps me from guessing about everything. "Oh I see I should enter here, but this is X where last time it was Y?" Even though X and Y have nothing to do with the rules of the system, I let them have an effect on the system, thus ruining the rules. Not so with our dear friend the EA from MT4 (or other such API's)!

The trick with mechanizing the trading is obviously to make sure that your mechanical counterpart is built on a solid and stable system that has been proven by hand and proven with forward testing.
I quite agree with you.
  • #13
  • Nov 8, 2006 11:08am Nov 8, 2006 11:08am
Can you code everything? How do you code a strong support, how far? How can you code a doji? How big is the body? If it's 1 pip greater that you have coded you won't trade? How can you correctly code a divergence? A hidden divergence? How can you code the right trend? How do you code a breakout?
If the break out is correct only 25 pips distance for the support/resistance, if it's 24 you won't take the trade, what about 23? How do you define a big candle? 50 pips? 51? 52? 49?
Do you trade always? Or between certain hours. If you trade for example breakouts between 6:00 am to 12pm, and the break out occures @ 5:45, you don't trade it?

I think not everything can be coded corectly. But if you have rules that can be applied 100% mechanically... then yes, it's great to have it.
Try hard, think fast, die young
  • #14
  • Nov 8, 2006 11:44am Nov 8, 2006 11:44am
To continue what DOF has just said, there are some cases that we have a feeling (not emotions) about what is happening in the market. You cannot write a mechanical code to work in that situation.
In a mathematical point of view, there is a point, which by losing one whisker, a guy is considered bald, but do we know it? We all have a feeling of a bald person.
Yet, there are some mechanical systems which works and looks fine (i.e. turtles), but if you look at a mechanical system as a black box (you have no idea what is inside and cannot change the parameters), you will be doomed<o></o>

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Making pips is easy, holding 'em is hard - Pipsopolis
  • #15
  • Edited 3:28pm Nov 8, 2006 1:29pm | Edited 3:28pm
Quoting dof
Can you code everything? How do you code a strong support, how far? How can you code a doji? How big is the body? If it's 1 pip greater that you have coded you won't trade? How can you correctly code a divergence? A hidden divergence? How can you code the right trend? How do you code a breakout?
If the break out is correct only 25 pips distance for the support/resistance, if it's 24 you won't take the trade, what about 23? How do you define a big candle? 50 pips? 51? 52? 49?
Do you trade always? Or between certain hours. If you trade for example breakouts between 6:00 am to 12pm, and the break out occures @ 5:45, you don't trade it?

I think not everything can be coded corectly. But if you have rules that can be applied 100% mechanically... then yes, it's great to have it.
I believe there are two different schools of thoughts in trading: subjective and objective.

In "objective trading" you have solid rules that define how to deal with market conditions. These rules are mostly based on technical analysis of the market.

In "subjective trading" the rules are not the only players of trading. Some other issues like the trader's experience and psychology of trade come into play.

If you are an "objective trader" you can replace your system with a mechanical system. You can backtest the system, optimize it, forward test it and then let it go. Every now and again you review the system and optimize it for better results. When the system stops responding to the market conditions then you replace it with another one.

If you are a "subjective trader" you need more than a solid system to trade. In this case it may be impossible or very difficult to automate your trading style. I believe such a trader should be a trading guru who is knowledgeable, understands and implements MM rules, is an expert in psychology of trade and has a great wealth of experience that keeps him/her away from making big mistakes.

The majority of traders do not belong to this group so my suggestion would be to stick with "objective trading" while you're gaining knowledge otherwise in long run you will be a loser.

Now my question for you would be, how do you define and interpret a doji? Do you have a specific definition? If yes, you can definitly program it. If not, how do you guarantee that you are making a correct decision when you decide a candle is a doji?

Similar could be asked about hidden divergence, correct trend, etc.

If you leave such questions to a mechanical system you start with an assumption and then backtest it over time, then you'll get the best result based on your criteria.

Keep in mind that in a mechanical system a big candle - for example - is not necessarily defined by a certain number of pips. It can be defined relative to somthing else - for example the average candle size in a period of time. The time period and the relation to the average candle size are again defined by backtesting and use of optimization tools.

If somebody uses complex programming tools s/he can write flexible code that changes behaviour due to changes in market condition.
  • #16
  • Edited 3:15pm Nov 8, 2006 1:34pm | Edited 3:15pm
Quoting sahamdarjoz
To continue what DOF has just said, there are some cases that we have a feeling (not emotions) about what is happening in the market. You cannot write a mechanical code to work in that situation.
In a mathematical point of view, there is a point, which by losing one whisker, a guy is considered bald, but do we know it? We all have a feeling of a bald person.
Yet, there are some mechanical systems which works and looks fine (i.e. turtles), but if you look at a mechanical system as a black box (you have no idea what is inside and cannot change the parameters), you will be doomed<?xml:namespace prefix = o /><o></o>

<o></o>
I pretty much answered this concern in the previous post. I just need to ask you a question. How do you know that "the feeling" you are talking about is right? In how many cases it generates profit and in how many cases in ends up in losses? How do you backtest that feeling? How can you convince yourself to respect that feeling.
  • #17
  • Nov 8, 2006 1:55pm Nov 8, 2006 1:55pm
Quoting sahamdarjoz
To continue what DOF has just said, there are some cases that we have a feeling (not emotions) about what is happening in the market.

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To have a "feeling" and deny that it is not affected by emotion is...... simply.... not logical. Watch a classic star trek once in a while. :
  • #18
  • Nov 8, 2006 3:17pm Nov 8, 2006 3:17pm
Quoting squat1962
To have a "feeling" and deny that it is not affected by emotion is...... simply.... not logical. Watch a classic star trek once in a while. :
I couldn't agree more.
  • #19
  • Nov 8, 2006 3:28pm Nov 8, 2006 3:28pm
wow wow, wait a sec. I didn't deny using analysis. I, myself have a plan and trade that plan. I am not against mechanical systems too. I am forward testing your EA on a demo account.
But have you ever record your "fellings" in your trading journal? When you take a position, are you worried, confident, angry, happy or...? This morning I took a trade (the system told me to take it) but I had this feeling that it's not gonna make it and in an hour my stop was hit.
If having feelings is out of order, then what is psychology in trading about?
Go and read some Dr. Elder's or Rob Booker's before watching Star trek. It might help.
Making pips is easy, holding 'em is hard - Pipsopolis
  • #20
  • Nov 8, 2006 3:34pm Nov 8, 2006 3:34pm
Quoting sahamdarjoz
wow wow, wait a sec. I didn't deny using analysis. I, myself have a plan and trade that plan. I am not against mechanical systems too. I am forward testing your EA on a demo account.
But have you ever record your "fellings" in your trading journal? When you take a position, are you worried, confident, angry, happy or...? This morning I took a trade (the system told me to take it) but I had this feeling that it's not gonna make it and in an hour my stop was hit.
Go and read some Dr. Elder's or Rob Booker's before watching Star trek. It might help.
Rob Booker is my mentor. I've read all his ebooks and backtested all his systems. Based on what I learned from him I was convinced that to be a successful trader (at least before becomming a guru) you need to eliminate feelings from your trading career and that's why I took mechanical trading serious. Now I enter and exit several trades per week without even looking at charts.

There are days that you are tired, there are days that you are under the influence of alcohol, there are days that you are too happy to trade. On all such days you may screw up your system. That's why it's better to leave trading to a machine rather than to yourself.

BTW, thanks very much for considering my EAs as a potential successful system.
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