Is trading Mental or Mathematical?

I was discussing this topic with a fellow trader and wondered if I could get some feedback here. I trade a mathematical system and I have recently automated it so for me and my trading, emotion no longer has anything to do with it. On the other hand most people do not use automation yet which means they are forced to wrestle with the psychological side. So my question is this: Does having a mathematical edge that is automated really alleviate the psychological side of trading?

Tags: forex, math, psycology

5 members like this

Comment by Sundaram on February 28, 2013 at 3:55pm: They just need to twist the mathematical algorithm once the pattern is identified then the system goes to the trash.

Comment by Derek Frey on February 28, 2013 at 3:58pm: who is "They" and how could they twist my algo when "they" will never and could never see it??

Comment by Sundaram on February 28, 2013 at 4:05pm: "They"=Market makers/big players.. Your orders are visible to them; that is what a little birdie told me some time ago.

Comment by Derek Frey on February 28, 2013 at 4:09pm: Ok well i wish you and your birdie all the luck a trader can have. You may want to look into some other animals to listen to. I heard a great story that involves three pigs but i digress.

Comment by Sundaram on February 28, 2013 at 4:13pm: Besides the birdie I also listen to bear or the bull. At the moment Bear is with me and says "Hi, Derek! How are you? Hope you are enjoying your trades. Good luck!"

Comment by Peter jcp on February 28, 2013 at 4:54pm: Hi Derek - I agree with Sundaram - "they" are the market makers - the key 10 -12 large institution players although really only 5 count as they have over 50% of the market.

These guys through Hi Tec computer wizardry realised after they set up HFT how they can blame computers when anything goes wrong. So that gives them a licence to "play" the market how they want and stop hunt and generally set up wrong sentiment.

If you have say a few hundred thousand dollars to invest in an expert programmer etc etc you might be be able to compete with them and end up with a good profitable system.

As we know 95% of all normal robots will always be out trumped by the market in either a month or at least within 6 months - they are just not sophisicated enough to compete.

Just take thousands of live trades and get use to losing etc - and then you can trades just as though you are on a demo - and we all know how brilliant most traders are on demo;-)

I hit my trading wall at 22 lots per pip four years ago and it psyched me - Nowadays I am more comfortable on smaller lot sizes and accept losses up to a $500 comfortably in under 15 mins - allowing me to get enough trades in a day to win.

Good Luck if you automate - I would love to automate my strats - but to get it right - as it is complex involving time etc would cost big bucks - and then it still might not be so good as me in manual mode

Regards

Peter

Comment by Lisa on February 28, 2013 at 4:57pm: Having an algorithm is more rules based & less discretionary which could alleviate the

psychological aspect substantially, but I’ve heard quants recalibrate their programs regularly ...

so technically they are discretionary traders with a robotic arm (?)

In plain English, they’ve rid themselves somewhat of the psychological aspect,

but not entirely (?)

✿❀ Lisa ❀✿

Comment by Lisa on February 28, 2013 at 5:13pm: That’s okay, Leon

I accidentally called him *Brain* ~ which is a compliment ٩(-̮̮̃•̃)۶

Comment by Lisa on February 28, 2013 at 5:23pm: hehe ~ Freudian slip (?)

Comment by Derek Frey on February 28, 2013 at 5:52pm: I see this idea all the time "...market conditions change so much that any automated ea has to have regular tweaks and be adapted to market changes ie ranging and trending etc." This is simply NOT true. While it is true for some automated strategies it is not true for all. The edge that I have coded has been around for almost 100 years and has not needed any changes at all since then, especially in the last 20 years while markets have been very volatile. So I must, based on my own experience, completely disagree with this idea, in fact i will take it a step further and argue that the ones that need the constant tweeks are crap, because as Lisa said "...so technically they are discretionary traders with a robotic arm", and that is correct, and not at all what I am talking about. There seems to be even more misinformation about automation than there is about trading in general. Yes most EA's are crap, but that in no way shape or form means they all are. And when you look at your competition (i.e. banks) it is clear that they are using algo's for almost all their trading now a days. So why is it that the retail side of the biz is so far behind?

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