A poster on the BabyPips forum decided to share some of their experience as a developing trader. There are some lessons in the post that I think are of broad value, so I’d like to share them here – with my own comments added, of course. 🙂
When I made the move to get into forex I was convinced that I could build an EA robot that would trade and make profit for me. In the first few months I spent my time learning to program in mql4, building robots, and testing them in the strategy tester. I learnt the following:
1 – The robots do marginally well, at best, and that is after a lot of tweaking
2 – Because so much tweaking is required, I believe it is impossible to make one that will work out of the box for multiple currency pairs
3 – Even if you get a robot doing well for you, it doesn’t mean it will make profit forever, you need to monitor and tweak it continually
Expert Advisers (EAs) are a major lure to especially new traders who see them as an easy way make money. For those readers who don’t know what they are, basically think of them as completely automated trading systems traders plug into their trading accounts and let run with little or no interaction. Thus the term “robot”. The system trades for you, so you can go about doing whatever it is you do and don’t have to worry about the markets and coming up with good trades yourself.
Sounds great, right? I mean who wouldn’t want to put their trading on autopilot?
The problem is point #3 above. Mechanical systems suffer from being rigid. They are not adaptable and the markets are incredibly dynamic, constantly shifting and changing. The chances of you finding or developing a single system that you’ll be able to apply automatically forever with good success is just about nil.
Trading isn’t easy
Just because of the fact that everyone has internet and that there are hundreds of brokers, doesn’t mean that forex is for everyone. It wouldn’t surprise me if most successful forex traders are well educated, but more often than not people who maybe aren’t suited to be traders are trapped thinking “That looks easy.”
I figured this out shortly after I stopped trying to make a robot. Although I quit trying to program the perfect machine I was still looking for the ‘set it and forget it’ holy grail. I was looking for the perfect combination of indicators that would give me great entry points frequently. I never traded live with any of these systems but I did backtest a few, but I quickly learnt that there was no guaranteed way to deal with whipsaws and incorrect signals.
You can easily substitute “forex” above with stocks, indices, commodities, or whatever market you like. They are all the same. The act of trading is very easy – just point and click. As everyone eventually figures out, though, trading successfully – no matter how you define that – takes effort and dedication.
Those who don’t go into trading with the right mindset can waste literally years and untold amounts of money chasing all kinds of quick fixes – systems, software, applications, courses, etc. Those who never get their heads screwed on right eventually flame out. It’s only those who eventually figure out how to properly frame their trading will have any shot at long-term success.