Today the computer you have on your desk is much more powerful than Mission Control Houston that helped man land on the moon. Powerful computers have changed our lives for the better and here we will look at their affect in forex trading and the application of forex trading systems by traders for profit.
So how useful are computers in forex trading?
The role of computers is very often misunderstood by forex traders.
Computers have enhanced our lives in many areas and help us solve complicated problems there is the belief forex trading systems can be created to trade forex markets automatically.
There are a number of forex trading systems for sale that promise to do just that - and most of them fail.
There are two reasons for this failure:
1. The System is to Complicated
Its tempting to make a system complicated and many traders do they figure the more elements it contains the better its chances of success however the complete reverse is true.
The more rules and parameters you cram into a trading system the more elements there are to break in the brutal ever changing markets - it's a fact simple systems work best as they are more robust and this has always been so.
2. Curve fitting
Many systems that fail in real time trading actually work in hindsight when their tested on data and the reason for this is curve fitting. Curve fitting is simply bending the rules of the trading system to fit the data. When the first rules don't work the trader simply bends them until they do. This is a bit like shooting at door with a shotgun and then after the event, drawing a chalk circle around each one to make it a bulls-eye!
Keep in mind that any segment of data is going to be different as the markets are not scientific in terms of their movement so the appliance of science is of limited use.
The above mistakes are often made in tandem and complexity or trying to be clever testing data and bending a system won't help you make money.
Here is another startling fact:
50 years ago 95% of traders lost and today the ratio remains the same - this is despite all the advances in computers forecasting and market data retrieval. It's pretty clear that the application of computers has made no real difference to the success of traders.
Many traders think the application of science and computers can help in all areas of life and in many they can but in forex markets this is not so.
Computers make your life easier but they cannot be relied upon to give you success.
Just as in the past a simple system will beat a complicated one and that is never going to change as forex is a game of odds not certainties.
Yes computers are helpful but the real key to trading is finding a simple forex trading system, understanding it and applying it with discipline.
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