Can a mechanical trading sys eliminate stress?

Discussion in 'Psychology' started by paulgun, Jun 12, 2011.

  1. paulgun


    If it can, then I would welcome your thoughts.
    Totally auto mechanical system, help wanted!
    I am looking for a system that can screen about 2000 stocks/ etf, for volatility, automatically calculate minor and major support and resistance levels, actively monitor over 100 trades at time using at least two indicators and place orders automatically, calculating the full margin and size of each trade.
    I do not at present have any programing skills but willing to learn. I do have over half a billion dollars worth trading experience in trading equities in the past, but emotional stress of any kind is not acceptable. If you are willing to help in exchange for some thing I can do for you, then we have a deal.
    To find out if I can help visit my profile.
    In the mean time I wish you all, happy trading!!!
  2. I'm curious about this question too. I have always believed (maybe wrongly) that mechanical system don't work in forward real trading, but it's also because I haven't seen or purchased a system that is consistently profitable. If there is such a easy mechanical system as Paul suggested, then everyone would be using it and there would not be a need to help you "built" another system from scratch. I mean, if there is a machine that can be purchased to wash clothes (washing machine), I don't have to ask someone to help me design one right? I could just go to buy one.
  3. fjpenney


    You have asked a good question and it will be interesting to see the responses. In my opinion, no trading system will ever eliminate stress. However, a mechanical system that you have confidence in due to experience using it will reduce stress.

    I am an ETF trend trader and I would say that my trading is 95% mechanical and 5% discretionary. For the most part, I find that I don't question the trades that my system generates.

    Regardless of the mechanical trading system used, I believe it is human nature to wonder if the system could be improved and, thus, there may be a small amount of stress resulting from this. Also, there is no mechanical stock trading system that doesn't incur drawdowns and drawdowns cause stress for most investors.

  4. Learn to trade one stock first using your method. Jumping to many stocks at once will only multiply your problems, your cost and speed up your eventual failure due to a massive drawdown with your name on it.

    Friendly advice.
  5. paulgun


    Thanks for your advice, even though on the surface it makes a great sense, especially for those who want to grow rich quick. I have traded in my own account equities worth over half a billion in three years (1986-1988), yet set on the sideline for over 20 years because I don't want any stress. I feel computers have come a long way since then.
    Once again thanks for taking the time reply!
  6. fjpenney


    One of best pieces of advice I can give is to find a trading style that suits your personality. You have to take into consideration the amount of time you want to dedicate to trading, holding periods that are appropriate for you, whether you want to use leverage, what instruments you want to trade, etc. Numerous trading styles are discussed here on ET but neither one style is suitable for everyone.

  7. paulgun


    I agree with what you are saying. My issue is how to get started in building an auto trading platform, since I don't YET have any background in any programing language.
    There are so many direction I could go. My needs are very specific, as such I am hoping some one already experienced in these areas can show me the direction I need to go, keeping in mind where the technology is going. I hope I have made the issue a bit more clearer.
    Many thanks again!!!
  8. Ash1972


    The only mechanical systems that work long term are those that don't work 'consistently', i.e. don't make money every month. In fact the best ones will be subject to lengthy loss making periods.

    Anything that purports to produce high, steady returns is a fraud, e.g. Madoff Securities. It simply isn't possible for anyone with retail transaction costs.

    And yes, during the drawdowns there will be plenty of stress as you wonder whether your system has stopped working. That's human nature.
  9. rwk


    @paulgun: You might have a look at cool-trade ( It requires no programming expertise to set up systems, and it's designed to run unattended.

    As Ash1972 mentioned, there is no trading without stress because there is no trading without losses, and losses are stressful.

    Unfortunately, Cool-trade has no backtesting capability, and backtesting can help reduce stress somewhat. If a drawdown is consistent with past behavior, that can help reduce stress, but the biggest drawdown is always yet to come. And system blowups always start with a small drawdown. So being able to test ideas is important, and that requires programming expertise.
  10. Please don't bring that guys name into trading...there is no comparison. He was a thief and a joke, never would or could be a trader.

    This statement is true and a good way to help in the reduction of this fear is to trade multiple positions and systems. Trade both sides of the market. Also trade different sectors. You can also trade based on patterns to help increase your systems success. The higher probability trades don't present themselves all that frequently in a particular stock.

    The stress comes in when you lose for long periods or lose a large amount. If you know your system you will know why you are losing. This is an understanding that comes after re-playing it over and over, going over results and backtesting looking through each period of losses and understanding why the losses have continued. Being able to mine the data and discover when the periods of losses or gains occurred is helpful. This isn't going to be clear at first, but it usually depends on the volatility of the market and whether the market is trending or not. Breakout systems do well in trending and expansion phases and pullbacks may or may not. In contraction phases, breakouts don't stand a chance and you would be much better off reversing the trade. It's very important to have all the tools necessary to find out these things.

    Ever thought about applying both at the same time?

    The truth is, that a system typically is going to do very well until you start trading it. When I was testing one of my original ideas live, it had not lost in 13 months trading the XLF. The most consecutive losses were 5 and the profit factor was around 2.0. The first month was a loss and there were 7 consecutive losing days. What you have to understand is money management all of the losses weren't huge they were tiny, but I did initially think it had stopped working. However it continued to work the next month.

    Almost every book for swing trading that I have ever read always applies a % of the price as a test for a stop-loss. This is not a relative measurement. This really is a useless measurement. It doesn't help you determine what phase the market is in. The phase of the market is probably the most important in determining HOW to trade. In volatile markets, this is not likely going to work. I believe it is used as a simple form of money management.
    #10     Jun 12, 2011