Bot Trading

October 23, 2009 | Posted by admin

Bot trading is based upon the premise that you can automate your trading strategy – thereby eliminating all hesitation and emotion from your trades – but also by limiting risks with stop orders and more.

Imagine having a million little programmed ants. Each one of which has very specific instructions to run into the market, snatch a crumb and then run back out again. Many ants will get crushed in the market, but if your bot strategy is good, many more will get out with a crumb. The accumulation of these small gains can generate a fortune.

Is market mathematics still fractal mathematics once bots are trading?
This is a question that traders often ask. Since much of fractal based technical analysis is based upon the fact that human activity – as biological activity – must in some way correspond to fractal geometry and mathematics. So, when human activity is replaced by bot activity – doesn’t this move you away from fractals?

A good analogy is probably the study of stochastics and using computers to generate random numbers. Since all random number generators have been created by humans, they can never be truly random. This is why some developers of software to generate random generators have actually included real events in the loop – things such as having an algorithm to analyze or produce strings of digits from a spectral analysis of some truly random event like smoke. They can place a spectrophotometer at a smokestack and turn the randomness of the smoke into truly random numbers.

The same can be said about bot trading – in essence, all of these bot trading programs have again been programmed by humans. Even though many of them capitalize on market inefficiencies (this is easier to profitably spot than attempting to predict markets), as these bumps are ironed out of the markets new ones are always appearing.

There are patterns waiting to be analyzed in the markets. Profits to be taken, but the days of doing them without software are long over.

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