Compelling reasons Not to trust Algo Trading

Welcome to the 21st century wherein trading can now be performed by bots (algorithm trading or automated trading -call it whatever you want) with minimal supervision! Just imagine the time, effort and money you can save by using them. At first glance, it may sound enticing but the old school way we trade which is “human trading” wherein we closely watch the market’s rhythm is far better than such things. Here are the reasons why you shouldn’t trust bots.

1. Useless – Sorry for the brutal use of word my fellow day trader but I’m still being modest on that. People think that algorithm trading is the panacea of this industry but in reality it’s not! It’s a total waste of money (that you should’ve invested instead). Let’s put aside the hate and review them in a brief and level-headed way. The commands, strategies and stuff that you input to it may perform magnificently when backtesting but when applied “live?” Boy, it’s a disaster! And so the calm verdict -useless!

2. A plain headache – Why would they say that it’s “automated” if you’re going to spend most of your time tweaking it every now and then? What’s the sense in that? Might as well change profession and dedicate yourself learning the arts of programming if you’re going to end up doing these things anyway. It’s a plain headache mate I’m telling you!

3. Time consuming – Like what I’ve said, you’re going to spend a lot of time adjusting the parameters of your strategy or strategies into the program just so that it hits its mark. I’d rather eat an exotic food in Asia than do this arduous task.

4. It confuses you – A couple of months ago, a friend of mine did the unthinkable. He bought that-which-must-not-be-named software and said it really works! He earned $500 USD in total from using it, but looking at the market movement during that week I could say even a dumb person can earn a profit. That’s because the market’s movement was surprisingly steady at the time. The next Monday, a call came in, it’s from my friend. He said he blew his account. What happened? Short version -since his strategy and focus was divided into two things, he’s no longer able to identify which is which and thus spelled his doom.