Trust the math you must!
The next step
In my last post, I talked about why I decided to go with an automated system. The next step in my research was to decide on which automation company. There are lots of options out there, but once you start looking, the choices narrow down very quickly.
Adapting to change
They key for me was the ability of the algo to adapt over time with changing market conditions. I felt that something that was hard coded and did the exact same thing every time with static stops and targets and trade management was not going to do so well when the market conditions changed – either during the day or long term changes over time.
Too many systems either curve fit to past results or are dependent on a major trend that could change at any time. I wanted something that could read what was going on in the present market and respond appropriately.
So, what it came down to was the math. I felt that with more and more of the orders placed in the market being done by computers, that would favor a math/statistics based approach. The higher the percentage of automated trades being placed in the market, the better for us to analyze since the human emotion element is all but gone, leaving algorithms in control.
Less humans equals less randomness. Also, many existing indicators are based on humans trading and, in my opinion, are becoming less and less effective as the algos take over. From my research, I don’t think many (if any) institutions are using MACD, RSI, etc…
When I discovered Inteligex, I knew I had found something different. Right at the beginning when I started learning about swarms, I started understanding the approach that was being taken.
With the data collection, AI, pattern recognition and machine learning, the algo will get better and better as time goes on. I realized that when a trade was setting up, the algo would have seen that same pattern and setup with similar market conditions 100s if not 1000s of times and know the chance of success. Then it would take the trade if the probability of success was high enough. Much more than I could ever hope to analyze and remember myself.
So, it all comes down to math and statistics for me. Knowing how the markets are being traded less by people and how Inteligex was being put together is what attracted me and now that I am here, the more I learn makes me realize I am in the right place.
I forget which movie it was but as Yoda said, Trust the math you must…