Page 10 - Module 2_The_Human_Element

Module 2 -Lesson 1 – the human element

Another related benefit comes when the trader back tests or forward tests a system. With an
automated trading system, this is as easy as pushing a few buttons and applying the same orders to
other market data. When the process is done, the trader has a legitimate expectation of how he will
proceed. Compare this to subjective trading, where someone might enter the market expecting to
make a huge profit overnight and be controlled by unrealistic greed. It simply isn’t possible to back
test a personal strategy as easily as one might run an automated system, and so the delusion goes
unchallenged.

This points to a final benefit of automation – the computer executes and follows orders without an
emotional connection, which goes without saying that mechanical systems are that they take the
human element out of trading. Even the best traders start to change their method when profits
skyrocket or losses mount. In most cases, this only results in worse results.

But once you set up your system to follow orders, it doesn’t know your bottom line or care about it.
It will continue to execute buy and sell orders until you make it stop. Since you should have tested it
before going live, the strategy will probably work out over time, even if your emotions temporarily
tell you otherwise.

Automated systems make trading more disciplined and consistent.

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