The first time I heard the term, I was like, what the ... is that. I approached it and learned it and now am testing some strategies live to see if it really worthed the effort.
When you ask about Mechanical trading you might hear that they are really good because...
When you ask about Mechanical trading you might hear that they are really good because...
- You automate your trade and let the machine to trade for you 24 hrs a day
- The machine exactly follows your strategy and never gets immotional
- You usually have the chance to backtest your strategy to make sure it is practical
- Mechanical trading could be a great approach to money management, to make sure you won't spend more than what your are supposed to on a specific trade
However, -although it might be to soon to raise these concerns - I'm really concerned about a few things:
- Technical analysis is very subjective, a chart pattern that appears to me as a head-and-shoulders formation can be interpretted differently by somebody else. It would be really difficult to quantify such interpretations in an acceptable way
- Mechanical trading - to my understanding - focuses more - if not all - on quantative analysis (i.e. technical indicators) and this can be misleading. Although the indicators can be of different nature (trend specific, oscillators, etc.) they are in the end one single approach to analysing the market behaviour
- You may lose opportunities created based on Fundamentals
Now, my questions are?
- Can we really use mechanical trading as an alternative to manual trading?
- Is there a mechanical tool out there that gives us the chance to analyze the charts more broadly? I mean be able to recognize trend lines, channel lines, chart formations, Elliott waves and so on.
- What is the best programming tool out there and which brokers use that?
- Are there good books written on mechanical trading?
- Do you recommend it? (I mean either as an alternative to manual trading or a good approach along with manual approach, or just as a tool to help us to have a better approach to the market)
If you are experienced in the field please answer the above questions. I think many people find the answers useful.
Thanks in advance,