This month we’re putting the spotlight on select mechanical traders. Just what do these people think of mechanical trading systems? Is it something they will keep using? Why do they like it? More importantly, what are their hobbies? Ha!
This month we have our very own johnnykanoo and Buckscoder! If you want to answer the same questions, feel free to reply to this thread! 
Well I can’t remember where I heard of forex but for some reason I started looking into it around 2006. I have always been in love with the idea of being free and being able to travel around the world and still be able to make money. I knew that if I could make sense of this whole thing it could pay my bills and so I started out researching online. Inevitably I found babypips.com and I promptly went through the school of pipsology. To this day I continue to read and study it is a never ending journey.
When I manually trade I use The Big E system. Big E Trading.
I find it to be simple and successful.
Every mechanical system can be improved with discretion. This is why A. manual traders are better than automated traders and B. why most of the time when somebody automates a manual system it ends up performing poorly. I think most traders add a discretionary component whether they realize it or not.
The best traders I know use principles of support and resistance as well as price action. Many traders use other critical levels such as pivots, daily hi/low or session hi/low ets, Fibonacci levels, and the list goes on and on. All of these involve discretion even pivots - do you use NY close or 12 Midnight? Good discretion comes from experience and from learning what works and what doesn’t. That’s why I tell newer developing traders to take their time, read as much as possible, and most importantly, get chart time in. That is the only way to succeed. Even the best mechanical system on earth will fail in the hands of someone who doesn’t apply these basic principles of trading. Not to mention money management which is also critical and even that is discretionary.
I am at a point now where I love to trade but I also have an electrical contracting business and a family. 3 boys and a most patient wife. Because of all these commitments I am limited in my trading. But it’s like they say necessity is the mother of invention. I had to come up with a way to participate in the forex market while keeping all my other commitments. That is how I got into automated trading. I approached it from the exact same standpoint as a mechanical trader would.
Step 1 was and is research. I go online and I try to figure out what is working and what isn’t. Then I try to see what type of ea’s are out there. There are many types and just like mechanical systems you have to find ones that work with your style and personality.
Step 2. Then I would backtest and forward test and see if the system was viable or not.
Step 3. I would go live with reduced risk and after a period of time I would increase my risk if it was doing well.
All this leads me to where I am at today. I basically have created a portfolio with several different ea’s. I constantly follow the above steps and I add a component of diversification. I would hate to have 5 ea’s all trading eur/usd it would clash with my ideas of money management.
Constantly. I find myself constantly pouring over numbers and analyzing results. If I don’t do this then I am blind to what is working and what isn’t. I find that all of forex (even mechanical systems) should be dynamic. These markets change all the time. If you can’t move with them you will lose. Knowing what is working and what isn’t is critical.
Hmmmmm… Only 3 things. Well let’s see.
1. Know thyself. There is no point trading something that doesn’t make sense to you or doesn’t work with your psychology. For example, I really dislike swing trading. It is almost a form of torture for me. I have tried it and I just can’t get it to work for me. I am more of a day trader and even more of a scalper at heart. I like to get in and get out. Stick and move ha!ha!ha! Anyway I digress. Bottom line is get to know yourself and don’t fight it. You are who you are.
2. Psychology psychology psychology. I know many of you will think this is unimportant but you’re wrong, it’s critical! For one, you have to have confidence in your system. If you don’t, you will bail on a trade way too early. Why would you bail? FEAR, fear is a big one. Nobody wants to lose money, and GREED. Greed is a killer! It will cause you to over trade or to take on too much risk and when you lose, your stomach will sink and out of fear you will kill your positions or even worse, out of fear you hold on and hold on hoping things will turn around and that is how you do serious damage to your account. It is a nasty cycle.
All these psychological elements play an important role in your success. Fear/greed, over confidence, unreal expectations. The list goes on and on, just be aware of these things and don’t let them sabotage your success.
3. Money Management. Live to fight another day! If your risk is too high, you will blow your account; if your risk is to low you won’t make meaningful gain. My money management is dynamic but at the end of the day I never want to risk more than 5% and that is even very high for me. I am very comfortable with 2%.
The School of Pipsology has a chart describing perfectly what happens to your account when you lose.Don’t Lose Your Shirt | Risk Management | Learn Forex Trading
If you look at it (the second table on the page) you will see how much you have to win to get back to break even after you do damage to your account. For example if you lose 50% of your account you will need to earn 100% just to break even! That is serious odds against you. You have to put odds in your favor whenever you can. This business will eat you alive if you’re not careful. If you are reckless with money management you will find yourself digging out of a deep hole.
The bottom line here is manage your risk. Look at the big picture. I know its cliche but this is a marathon not a sprint. By risking 1-2% you are able to hit a losing streak without killing your account. I recommend to everyone to really understand money management.
Yes and no.
Yes I love automated trading but no, I think mechanical systems usually suck when we automate them. I take on a different approach. My approach is that mechanical traders will outpace robots every day of the week because of the discretionary element. However, trading with expert advisors has proven to work well with me.
My world view on automated trading is different. I believe that to trade like a trader, you must think like a trader and be discretionary and know the in’s and out’s of your system. A strong argument could be that every discretion you use could be coded and perhaps that’s true. But I think EA’s don’t have to trade like humans do. They operate differently, they are able to do complex math and follow many pairs at once. I capitalize on their strength.
While EA development continues to grow and mature and awesome things are happening, I still feel that nothing beats our own intuition.
As many of you know, I love expert advisors. I just realize there are many ways to skin a cat. There are strengths and weaknesses to all trading models. Mine is uniquely mine :d lol!
At the end of the day we have to do what fits us. For me with my time constraints I have to automate even though I recognize that those who trade for themselves ultimately have a better edge.
Very interesting. I would like to visit his planet sometimes. I wonder what there restaurants are like. Seriously though he seems very genuine and definitely fun to read. I like the way he evaluates systems.
Okay, once I was on eBay and I saw a psychic offering her services to bring success for forex traders. Yea ridiculous. So anything involving tea leaves or voodoo I will go ahead and skip. Also on another forum there was serious talk of using planetary charts to trade forex. Give me a break what a joke!
Well I hate to admit it but I love to eat. My favorite food is Italian. I love spending time with my family and visiting interesting places. Mostly, I love to live life and enjoy. I also love music bike riding and weight lifting, long walks on the beach and pina coladas’ ha!ha!ha! Just kidding lol but seriously a ****tail now and again is certainly fun too. In many ways I am a visionary so I love to dream about the possibilities.
Not the desire to become rich! I looked for a way to transfer my money overseas or hedge it in some way with my business.
When I found out there is an opportunity to develop expert advisors I was hooked with the idea to check if I can make money on a consistent basis.
It’s mostly intraday trading. I like the idea to reduce my exposure and not to have trades in the markets with a system over the weekend or for several days.
Yes, strictly. I learned from the turtles. Those who followed the rules strictly had the best performance.
I am live with my systems/bots since over a year. Coding a bot goes quick. Less than a week. I develop computer programs for 30+ years. Backtesting and tuning takes the most time. That can take some weeks.
If the system is made, backtested and live, after a few weeks of fine tuning it works on its own. It is constructed to work over years with a reasonable equity development, risk exactly adapted to my personal tolerance.
Excellent question!
First, I guess I can make money consistently with it. I already made profit with one broker and closed that account. I say “guess”, because I see me still after 2 years of trading as a newbie. Time will tell if I am right. I also learned that I can reach my goal, which was never to get a margin call.
Second, the markets are not 100% efficient like the theory goes. This makes sense in a way, because if there wouldn’t be inefficiencies, nobody would trade.
Last but not the least, my understanding of statistics grew to an extent where I believe I know more about markets now than I did any time before.
All done already! In the last 10 years or so of my career I was just managing. Now I manage bots which make money. I do not like the idea of trading for a living day after day for myself. I am not a routine job lover. I do trade and experiment, because if I would not learn to trade, I couldn’t develop bots. However, doing the routine job there are the bots for. They are much better than I am in discipline, accuracy and speed.
I read a little about him. I think he is a funny bot from outside this galaxy, not knowing what the word “funny” really means. If I would be allowed to ask him a question: How does he travel along from one galaxy to another? Is he using worm holes or over light speed or what else?
I am not sure which of both is more ridiculous:
“Bots can’t trade for profit.” I do not say I trust in black boxes which are sold. Because it doesn’t make sense to sell a consistently profitable bot. However, if you know what you do, it’s possible to shrink wrap your trading activity into a bot.
“Fx trading is more psychology than anything else.” Psychology is in my opinion way overhyped, not only in the trading business. My bots have no mind, no heart, no feelings, so how does psychology then come into play? Sure, I am the one who developed the bots. Sure I have emotions if the bots make a loss or a profit. However, it is like any other business. If a bakery gets more customers and sells more cakes it’s a nice feeling and if the customers stay away it’s the opposite. Does that mean the emotions have any impact on the business? The manager of the bakery just has to decide if the business is doing like planned or not and then take it out of business. However, if you love what you do, you will get to the point of success sooner or later. That is the psycho factor that counts!
Ok, just some buzz words: Flying, skiing, traveling, reading, listening to metal music, watching a romantic (road) movie, meeting friends, hanging around the babypips forum and posting some stupid ehm I mean of course super wise comments. Plus I do art photography and produce short movies.
Well. Ananias. I’m ‘hurt’ to say the least!!! I’m the ‘Mechanical Trader King’ and I wasn’t asked to participate??? What??? Does a person only get ‘one shot at fame’ per annum??? LOL!!! I AM ONLY JOKING with you (but not about the ‘Mechanical Trader King’ part though)!!! LOL!!!
Well done johnnykanoo and Mr. Gecko (Buckscoder) (you bast*rds)!!! LOL!!!
Nice ‘interviews’.
It’s THE ONLY way to trade and be profitable (mechanical trading that is). And by ‘mechanical trading’ I don’t necessarily mean using ‘bots’. Any new trader, whether they be trading spot FOREX or equity futures and commodities, that thinks that they can trade profitably on fundamentals or news is fooling themselves. Not even analysts that have studied the markets for years can ‘get it right’ most times. As a matter of fact: not even the FINANCE MINISTERS of the G20 Nations can ‘get their act together’ in case nobody noticed!!! LOL!!! So what chance does your average new, inexperienced, trader have of ‘calling it right’ based on fundamentals or technical analysis??? (Please note: while some may not realise this there is indeed a difference between ‘technical analysis’ and ‘mechanical trading’).
Anyway: there’s some REAL good advice and input in these two ‘interviews’ so ‘take heed’.
The only thing I don’t TOTALLY agree with is that ‘trader psychology’ is not THAT important. If you’re trading with ‘bots’ then of course it isn’t an issue. But if you’re trading ‘mechanically’ but ‘in person’ then it’s another ‘story’ altogether (in my humble opinion of course).
Regards,
Dale.
Dale,
Well I thought you were getting too tired of all the popularity you’ve been getting! Haha. Happy to read your thoughts here btw! Don’t worry your 15 seconds of fame will come again.