The question of the day is, can automated trading systems benefit futures traders in such a volatile environment? With the never ending negative news hitting the airwaves coupled with the huge spikes in volatility, commodities traders from around the world are looking for trading solutions to this new trading environment. As trading systems continue to be deployed across all futures markets, do they benefit traders or add to the madness of the markets?
Automated trading has come along way and for the most part probably has benefited futures traders who lacked the discipline to execute their trades. Remember, even a great strategy will be hampered by a futures trader with average discipline, but an average strategy implemented by a trader with excellent discipline can have a much better shot at success. So in this context, our opinion is automated trading systems can benefit certain futures traders in this volatile market.
Opinions expressed are subject to change without notice. I make no promises or guarantees implied or otherwise that utilizing technical analysis in the futures market will result in profits or limited losses. There is significant risk of financial loss in trading futures; therefore you should carefully consider whether such an investment is right for you in light of your financial position.
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Most automated trading systems to be utilized in futures trading are based upon technical analysis. Trading systems are based on technical analysis such as; moving averages, relative strength indicators and chaos theory, just to name a few. Trading Systems in regard to futures trading can be simple to very complex in how they generate trading signals and can be implemented in several commodity markets or just one futures market.
There are thousands of automated trading systems deployed in the futures market that generally operate on one of three time frames or objectives. The time frames are typically intra-day, intra-week or long term. A commodity trader can design and implement a trend-following system, a countertrend system, spread trading systems or breakout systems within all time frames. Each trading system and time frame which it is deployed has advantages and disadvantages with the common denominator being all trading systems are fully automated and do not require constant monitoring of the futures markets once implemented.
A Trend-Following Futures Trading System is probably the most common method of automated trading systems within the futures market. In it’s most basic form, this atomated trading system simply waits for a significant price movement in one direction and then buys or sells the commodity in that direction. A trading system designed with this concept will utilize such trading models as a moving average crossover.
A Countertrend Futures Trading System is basically the opposite of a trend-following system. The fundamental idea behind countertrend futures trading systems is to sell when markets are rallying and buy when markets are selling-off. A trading system designed with this basic concept will utilize different types of Oscillators that attempt to interpret the strength of a move through mathematical calculations such as Stochastic or Relative Strength Indicators.
A Breakout Futures Trading System is based on the theory that if a market establishes a new high or low, the price movement is most likely to continue in the direction of the breakout. An example of a simple breakout system would be if a previous high in a market over a period of days, weeks or months was broken and a buy stop order was deployed would be an example of a very simple Breakout System.
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Technorati Tags: Automated Systems Trading, Futures Trading, Systems Trading
The first advantage for utilizing a trading system in the futures market is that once a trading system is developed, tested and implemented the need for a futures trader to monitor the commodity markets and implement the trades are no longer necessary. Computers become the trade executioner and manager. Therefore, a futures trader that does not have the ability to monitor the futures markets as do professional traders, then a trading system might be a good way for this type of futures trader to participate in the commodity markets.
Another advantage of system trading is that it takes the emotion out of trading futures, which is often cited as one of the biggest problems futures traders encounter. By utilizing a trading system a commodity trader need not make any decisions, which in turn will make an automated trading system more consistent in it’s entry and exit of futures trading strategies.
If you don’t have the time or experience to develop your own trading system you could buy or lease a trading system. Some companies sell trading systems that they have created while other companies will give you the signals generated by their trading systems for a fee. You may also have a profitable manual trading strategy that can benefit from automation, but you lack the necessary programming skills. In this instance there are companies that will take your manual strategy and automate it. There are other companies that can audit your trading system or proposed trading system and suggest areas of improvement, which could substantially improve your bottom line results. There are definitely plenty of resources for traders looking at utilizing trading systems.
Opinions expressed are subject to change without notice. I make no promises or guarantees implied or otherwise that utilizing automated trading systems will result in profits or limited losses. There is significant of financial loss when trading futures; therefore you should carefully consider whether such an investment is right for you in light of your financial position.
Technorati Tags: Automated Systems Trading, Systems Trading
A Trading System is an automatic implementation of futures trading strategies through the use of entry and exit orders based on a set of predefined rules. One major reason trading systems have become so popular, in regard to futures trading is because of the basic belief that automated systems trading is supposed to take out the human emotion of futures trading. These trading systems are also able to deploy complex strategies more easily and efficiently. The use of such trading systems in the futures markets has intensified with the continuous growth in the volume of trade worldwide.
Computerized Systems Trading methods rely on one simple assumption, that price trends may be discerned in the futures markets and speculative risk can be reduced utilizing such futures trading systems. These futures trading systems are able to calculate very large mathematical ideas within a very short period of time, thus supposedly giving the edge to the systems futures trader.
I would like to point out that trading systems are not the Holy Grail to futures trading, even though there are plenty of gurus who imply that some systems are actually the Holy Grail of Futures Trading. It is my intention just to make the buyer of these systems aware that utilizing trading systems is a viable strategic trading option, but is not without the same risk every trader assumes when speculating in the commodity markets.
With that said, utilizing trading systems in the futures markets has its definite advantages for certain type’s of futures traders and also has its drawbacks. In this article I will address some of the advantages, disadvantages, system concepts and alternate resources for system traders. We also invite you to share some of your insights about systems trading and how it may have helped or hindered you in your pursuit of profits in the futures markets.
Opinions expressed are subject to change without notice. I make no promises or guarantees implied or otherwise that utilizing automated trading systems will result in profits or limited losses. There is significant of financial loss when trading futures; therefore you should carefully consider whether such an investment is right for you in light of your financial position.
Technorati Tags: Automated Systems Trading, Systems Trading