Automated trading system are have made it possible for traders to get quotes on their phones while on the move. However, new investors get somewhat perplexed when it comes to choosing the right automated system. While there are plenty of great systems available, only a few can help people make money. So, how should you go about finding the right system? Here are some things to consider.
You Do Not Have To Create It
Many new investors and entrepreneurs feel that they can build a new system for themselves – a system exclusive for their venture. However, it takes years of work to figure out algorithms to make such a system.
If you feel that you have come up with a winning combination, then it is best to send your ideas to a professional system-testing firm that will check how viable your idea is after putting it through their testing process. Reputed firms are willing to put your algorithms through a stress test for you, feeding slippage and commission numbers, checking its performance on out-of-sample data.
Avoid Trading Schools and Packages
Many new businesses have cropped up around automated trading systems, but you have to differentiate between the real and the flux. A trading school or an indicator package is not a system. Even trading software is not a system. These are not mechanical systems that will do the trading for you.
Rather, they can be used to create a system, which you still need to check whether it will work for you or not. They will show you past data, but what you need are figures to predict the future.
Opt for a Few Good Resources
Because there are thousands of trading systems out there, you need to zero in your search on a few. You will not find time to review each system, and it will be a very overwhelming process as there are multiple parameters to consider like style, costs, developers, and more. Create a list of developers whose work you find promising and start from there.
Avoid High Upfront Costs
Most developers will be interested in selling their software to you rather than being interested in actually making money for you. They will try to sell their systems to you with very high upfront costs, some costing as high as thousands of dollars. They will also mostly disappear after the sale and will not be available to answer queries.
Try to go for developers who will agree to monthly leases because they are more concerned about the system performance, and that is how they will retain their clients.
Look for Real-Time Client Results
While you might have invested in an automated trading system looking at the simulations, be prepared to see very different results when you start trading. So, try to get some real data with real-time client results. They will tell you whether the system works or not.
Backtesting using previous data will not hold well into the future, as trading is a very dynamic domain. You will not make money in real-time but superimpose a new system’s parameters into old data.
Stay Away From Variables and New Versions
Though it is good to upgrade your system every once in a while, getting too many upgrades from the systems developer is not good. Go for a system that you can set and forget for at least a couple of years. The entire idea of investing in an automated system is to make things easier for you. If you constantly need to monitor and upgrade it, it kind of defeats the purpose.
Developers will simply release new versions from time to time to make more money. Every time there is an upgrade, it will create a new system, making the previous backtesting invalid. You will have to start all over again and reevaluate your investments. Do fix bugs from time to time, but avoid systems that need complete overhauls too often.
Go for a Personality Test
This might seem out of place for a mechanical system, but a lot has to be said about this. The trading system should match your personality, believe it or not! How you look at trading and your idea of making money will influence the automated trading system you choose.
You do not want to invest in a system that does not meet your expectations. As an investor, look past the basic performance figures and check whether it brings you a winning percentage or enough action in your account.
There could be a few trials and errors when it comes to choosing a good trading system, but keeping an eye out for the details might give you a money-making machine in due time.
