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