Mechanical Systems of negotiation - Identify the people who make money!

By: Stephen Todd

trading systems are mechanical, as might be expected, systems that make trading decisions for you.

The idea of having mechanical trading systems, you can simply use to generate automatic profits, is obviously very attractive to many traders.

Most traders do not end being disappointed with mechanical trading systems, as they never seem to match the hype of sales and performance figures used to sell the system does not seem to ever be repeated in real life .

Why most mechanical trading systems fail to live up to the Hype? There are two main reasons:

Black Box Systems

These are systems where the seller does not reveal the logic of the system. Of course, for a commercial success it needs following strict discipline.

However, if you do not know the logic of a mechanical trading system, you will probably not have the discipline to follow it when it occurs a period of losing. If you do not have the confidence to follow a mechanical trading system, you do not have a system at all!

Curve fitting and optimization

Another problem is the curve fitting or optimization of mechanical trading systems. These systems enable outstanding performance in the back test because of the tweaking of the system of rules to fit the data. A trader has compared to hunting this time of holes in a barn door, and then draw circles around each hole to make every shot Bullseye!

Of course, anyone can make a mechanical system for the money if it is already know what happened in the past.

You'll never see a show hypothetical fails! Most providers achieve this goal by making the system fit the data, which of course will lead to disappointment in the brutal world of trading.

The fact is that most trading systems mechanical does not give the results they promise, and traders find themselves disappointed. This does not mean that there are no good mechanical trading systems to buy, but you must do your research first, and the following list will give you the highlights to look.

The mechanical systems - what makes a good system?

The rules and logic are explained in detail, if you have confidence in the system when it undergoes a series of consecutive losses:

Some evidence of a track record in real time to know the system has made money in the real world of negotiation and not merely hypothetical.

Look for simple systems, as these tend to work better and will tend to be more robust in the real world of trading.

Avoid optimized system. Signs of an optimized trading system are those that use the unique rules or parameters specific to trade on financial markets. If the system has strong principles, it should work on a wide range of financial instruments.

Make sure that the sample numbers are consistent with the equity you have to trade.

Not all mechanical trading systems are doomed to failure, but if you want to get one that works, be realistic and do your homework first.

Build your own system

Most traders like the concept of a mechanical trading system, but as having an input to customize the system to their own personality.

If you have entries in humans, it is easier to implement the trading system with a rigid discipline, which is the key to building consistent profits.

About the author

To learn more about using Gann trading methods please visit our website: http:www.gann.co.uk