Failing Robots
j4j’s comment about all forex robots eventually failing is interesting.At first I thought “That Makes since.” but as I continued to think I started to change my mind.
I believe that forex systems are based on analysis of historic data and predictions based on the the relationship between events. It’s strictly analytical and as long as the rules stay the same the same systems based on these criteria should preform the same in a 100 years as they do today.What these robots and indicators can’t include is the human factor.
The human, emotional, factor involved in the market can never be predicted by an EA. The nonlogical herd mentality, fear, anti trend, attempt to time, elements that humans poses is not equatable and therefor the EA’s can not predict.
Forex robots should act the same at all times. Humans will not. EA’s will function on the data they are programmed to analyze. My mood can effect how I react to the same situation on two separate occasions.
Why would a bot eventually fail all things being the same?
Thanks for your time,
The Forex Noob
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May 26th, 2009 at 7:54 pm
Hi Jeff,
Just to clarify, DiNapoli asserts that all “mechanical trading systems” fail eventually. By this he means any system of rigid rules. For example, trading every time a 20 period Simple Moving Average crosses a 57 period Exponential Moving Average. He didn’t mean ‘bots specifically. Note, however, that ‘bots begin with a rigid set of rules, albeit with the ability to modify those rules over time (limited by the imagination, experience, and insight, among other things, of the programmer).
When I started trading a year ago, I began with a mechanical system called “FiveTic Forex.” This is not a robot, it’s a specific combination of indicators found in any trading platform, with the addition of a novel way of looking at individual bars or candles.
FiveTic was only a few months old when I purchased it, and the creator of the program (Matt Sharp) offers good support and posts his trades almost daily, with educational comments, in a members-only site.
As weeks went on, his daily updates in effect added layers of rules to the trading system. This is because he has many years experience in Forex, and knows almost instinctively tiny patterns that appear from time to time, which he recognizes as “go” or “stay out.” He explains these in his daily trades, but there are many such situations. While this makes the system more effective, it also makes it more complicated.
Sometimes you’ll see a pattern similar to one Matt has mentioned, sometimes a pattern is hard to see if the physical scale of the chart on your individual screen doesn’t happen to facilitate seeing them, so it doesn’t even occur to me to change the chart scale until after a losing trade is under way. Or sometimes you simply won’t recognize a warning, or have forgotten this one, to your misfortune.
When you do recognize these “extra” patterns, it will increase your winning percentage, but if you don’t…
And when the markets went through their unprecedented volatility in Aug – Nov 2008, FiveTic was not nearly as effective, until Matt recognized this was going to last a while and changed the FiveTic trading rules accordingly. This made DiNapoli’s point about system breakdown very real to me — unfortunately, painfully.
Please note that FiveTic is successful for many, and I will likely return to it, but for now I only occasionally plug in the indicators to see if they confirm what I’m planning at the moment.
Hope this clarifies a bit. Thanks again for this site, and keep up the great work. Good trading to you!
Joe