Semi-automated vs fully automated trading – what could be better for you

In today’s article, I will focus on automation as a critical factor for long-term sustainable profitability when investing in financial markets.

Victor Tomov | 01:19, 2019/06/07

Dear aspiring investors,

No matter how significant your trading experience is, you may reach a stage where you start looking for ways to make your investment journey much more manageable and smoother when it comes to the following points:

  • analysing charts to identify trading signals (entry/exit levels) for your positions
  • following up with the latest market trends shaping the financial industry
  • monitoring the news and events driving the market prices
  • selecting the appropriate trading strategy for specific market conditions
  • defining the trading style that fits your personality
  • fighting with the stress of holding an open position for longer than expected
  • composing an optimum portfolio of financial instruments in which to invest
  • reducing the impact of emotions in your decision-making
  • managing the risk by defining the order size, trading volume and the maximum exposure across different markets
  • monitoring the performance of a selected trading strategy for ongoing optimisation
  • setting realistic expectations towards potential profits and acceptable losses
  • defining the size of the initial investment capital

The list got long, but it is not exhaustive as every one of us faces individual challenges. Improving your efficiency in any of the points above could significantly reduce the time spent in front of the screens for trading. But “how” is the question you may be asking?

The evolution of modern technology has brought artificial intelligence into our lives. Carefully engineered algorithms are automating more and more daunting human tasks. The financial investment process is not an exception. In trading, automation comes in different forms:

  • simple charting tools and widgets
  • add-ons for enhanced functionality of the trading terminals
  • trading robots autonomously executing a single trading strategy
  • copy trading setups for individual orders or entire portfolios of investment strategies

The extent of human intervention applied in their usage divides them into two categories:

  • fully automated – no human touch during their normal functioning on your trading account
  • semi-automated – automatic execution under continuous monitoring and fine-tuning by an expert

By “human intervention”, I mean actions taken either by yourself (the trader) or by the developer (the portfolio manager).

When you look at things from this perspective, you will realise that every automatic tool or system could be easily transformed into a semi-automatic one while the opposite is not always possible. For example, you may use a trading robot to help you by opening new trades on your account, but you may step in and decide when to close them. You may adjust the predefined settings of an add-on or an expert advisor to suit your needs and preferences over time. However, you may not be able to modify the trading strategies used by a portfolio management expert in a copy trading system connected to your account, nor define the funds' allocation in the portfolio of the master account submitting trading signals to your account.

There is no right or wrong answer which option to choose as what could be better for you depends on multiple factors such as:

  • Your personality – do you expect a system you pay for to always work flawlessly for you without taking any of your time, or you prefer to be involved in the process providing input to the system that trades with your money.
  • You risk affinity – are you tempted by the significant profits expected from taking higher risks or you like to keep it calm and conservative trying to be on the safe side.
  • Your investment knowledge and skills – are you new to investing in financial markets or have learnt the rules of the game by self-trading or formal education.
  • Your investment experience – were you successful when trading on your own or using some form of automation or your trading results were mostly negative.
  • Your investment capital – higher returns come with higher risk and trading volumes, which means that your investment budget limits your access to different automated systems. The bigger your starting capital, the more comprehensive is your choice of available options.

To make things easier, you may go for a packaged solution that involves no intervention from your side at all no matter of the trading automation category. Both such semi- and fully automated investment solutions have their advantages and pitfalls.

By selecting a fully automated trading system (e.g. an Expert Advisor or the so-called “trading robot”), you embark on an autopilot flight entirely relying on the stability of the used algorithm to act upon existing market conditions in your favour. You will need to evaluate the available alternatives in terms of volatility filters carefully, portfolio diversification, the trading strategy applied, risk management settings, maximum drawdown and other performance indicators. Do your homework to get realistic expectations and feel comfortable using the system for longer. Beware though that there is no single strategy or trading logic that is right 100% of the time, which means that your account equity could go up and down and evolve cyclically. You risk more, but the rewards could also be quite significant, especially in market phases that are suitable for the trading robot’s logic. You get order execution with no emotion but pure math.

By selecting a semi-automated trading system (e.g. a copy trading setup), you delegate to a human expert (not a programmed robot) the composition of your portfolio and the selection of trading strategies that correspond to specific profit targets and market conditions – this is the manual component of the system. On the other hand, all trades that are opened by the account of the system (called master account) are automatically resized to fit your account balance and placed on your trading account for execution. In other words, you can still enjoy the autopilot flight, but you are backed up with manual landing and departure as well as intervention by the human pilot if the market conditions require it. An essential feature of a semi-automated investment system is the expert optimisation of the strategic portfolio and the trading frequency according to the achieved performance results. Your equity may grow sustainably without substantial deviations and significant drawdowns.

Neither of the systems can predict the future. Once you have an open position, it stays in the market for as long as the applied logic requires. It may end up in profit or loss.

Full automation is excellent when you make your first steps in trading and like to achieve results fast while learning how the markets work and defining your trading approach. You will need to find a reliable solution that fits your expectations. The semi-automation may take your investment journey into to a new level with the right mix of human expertise and automatic order execution for sustainable results. Both could solve most, if not all, of the pain points listed at the beginning of the article. It’s up to you to decide which one to use.

With TradeRobo EA (a fully automated MT4 trading robot that you could adjust according to your preferences) and Quanti-Hybrid Ultra (a hybrid semi-automated digital portfolio management system driven by the German quantitative scientist Stefan Friedrichowski, PhD), my company Findilao gives you freedom of choice and peace of mind (in terms of quality and reliability) for the growth of your investment capital.

Warning:

Disclaimer: This article presents the personal opinion of the author based on individual experience and past results. None of its content shall be considered investment advice. Past performance does not indicate future results. It is your sole responsibility to decide whether to follow any presented techniques or approaches and neither the author nor Findilao Ltd can be held liable for an outcome from your actions.

Risk Warning: Trading Foreign Exchange and Contracts for Difference (CFDs) is highly speculative and may not be suitable for all investors. The leverage created by trading on margin can work against you as well as for you. Only invest with money you can afford to lose and ensure that you fully understand the risks involved. You should be aware that your investment may go down as well as up and you may not get back the full amount invested. Seek independent advice if necessary, before buying a subscription to use our services.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Why you should take good care of your trading robot

In today's article, I am focusing on the importance of taking good care of an Expert Advisor (EA) that you use in your trading account to achieve sustainable profitability.

Victor Tomov | 02:47, 2019/05/31

Dear aspiring investors,

Let me be pretty clear and straight-forward with you from the very beginning. No matter how difficult it is to accept it, but there is a single truth about the so-called trading robots:

If you buy an EA and start using it on your trading account, you have to take care of it - the same way you take care of your shiny new car or any other tool that you plan to use for a long time.

This statement may sound quite controversial to you at first glance, especially when considering the original purpose of a trading robot, i.e. to fully automate your investment in financial markets by opening and closing trades on your account relieving you from the necessity to study the price indicators looking for new entry opportunities.

The decision to use such a tool is reasonable, just like the decision to buy a new car for satisfying your daily travel needs. After all, automation is the latest hype, and artificial intelligence gets into our lives quite fast. Algorithms are developed to facilitate the daunting routines of any activity. It is what the robots are good at - helping us achieve our goals while keeping our brains focused on what they are best - engineering, inventing, modelling, creating.

A car alone will not get you to your destination without your input as the driver. This same car will not last long if you ignore its early signals when something may get wrong not serving it properly. And a car is full of automation these days. No matter what tools you are using, you are the person in charge of the results. The "set it and forget it" mentality could cause troubles in the long run.

The usage of trading robots (e.g. MT4 EAs) is no different. But why? Aren't they built by experts who know how the financial markets work? Aren't they based on extensive backtesting for years before the release date? Yes, they are (or at least the high-quality ones) but so is your car, engineered and compiled in high-tech factories under strict regulatory safety standards.

But just like cars, the Expert Advisors are exposed to constantly changing conditions. And when it comes to finance and investment, change is the only constant variable in the equation. No matter how robust a trading robot is, it is based on a standard logic coded in its algorithm and applied consistently. Indeed, consistency is one of the best qualities of such automated trading tools immune to emotions. However, there are always moments when the price of an asset moves in an unpredictable direction causing fluctuations of different range and magnitude. In such situations, we talk about turbulence and nothing is immune to it, especially a robot that follows a predefined logic strictly. The high-quality robots will have carefully set volatility filters to avoid dangerous situations, but they may get caught up by misleading early trading signals. Errr, it's getting complicated, isn't it?

It's in our human nature to look for shortcuts. It's our brain that makes the simple solutions so tempting and attractive. It's normal for us to go for the low-hanging fruits in the complex world of financial investment. There is nothing wrong with that considering the wide range of technologies and services available. Hence, what we often underestimate and overlook is our maintenance and monitoring responsibility - the efforts we have to put into ensuring that the tools we are using (no matter how advanced and user-friendly they are) perform with stability and will serve us in the long term. This is especially true when using trading robots. If we are already doing so, it's good to ask ourselves the following questions:

  • Are we monitoring the robot's performance daily (by checking the results from time to time, even if only via an investor password for our trading account)?
  • Have we read the specifications of the robot and understood all the details about its logic and strategy before buying and starting to use it?
  • Are we stepping in when we notice a negative trend in performance?
  • Are we spending some time testing new settings to optimise the EA's performance?
  • Are we learning from observations of the robot's activity about the financial markets on which it trades? 

If we are considering to use trading robots on our accounts, the questions listed above apply, but we should start them with "are we going to".

If one or more of the answers are negative, then comes the next question:

"Why do we take such good care of our new car or keep up with the latest upgrades of our gadgets (which could be quite expensive, by the way) but don't bother with checking and maintaining the trading robot we bought to earn money for us?"

The answer could be quite simple - complacency is creeping in when we touch something we do not fully understand and it's much easier to either stop using it when we first notice an issue or wait passively with the hope that things will get better soon. Yes, they may well get better sooner or later, but what about the lost potential profit opportunities. And such opportunities exist in almost every market condition. If we see something goes not as expected, nothing stops us from taking things in our hands, learn new skills, test, optimise or in other words "get our hands dirty", and get back to the joyful things in life once all is settled.

The great thing about trading robots is that they require almost no manual intervention and if so - it's relatively rare if we are talking about a high-quality product. But still, it's quite vital for us to be ready to take actions when we face market turbulence. It's not about being scared or not using EAs; it's about taking care of them just like we do with other valuable things in our life. If we do it, they will serve us for a long time, and with trading robots, this means quite hefty profits compared to the flat close-to-zero passive income we generate from standard savings products. All this with almost no effort from our side!

Applying the magic of human creativity to an automated trading system could be rewarding. I have been doing so for a long time and invite you to read my case study where I present a possible scenario for maximising the profitability of TradeRobo EA - a German-engineered powerful MT4 EA delivered to you exclusively by Findilao. It could be interesting for you if you like the idea of automated trading with a human touch. Moreover, I invite you to join my weekly webinar on the topic.

If you still prefer leaving a trading robot to run fully autonomously on your account, TradeRobo EA is also a good fit having a high-end risk management algorithm.

Warning:

Disclaimer: This article presents the personal opinion of the author based on individual experience and past results. None of its content shall be considered investment advice. Past performance does not indicate future results. It is your sole responsibility to decide whether to follow any presented techniques or approaches and neither the author nor Findilao Ltd can be held liable for an outcome from your actions.

Risk Warning: Trading Foreign Exchange and Contracts for Difference (CFDs) is highly speculative and may not be suitable for all investors. The leverage created by trading on margin can work against you as well as for you. Only invest with money you can afford to lose and ensure that you fully understand the risks involved. You should be aware that your investment may go down as well as up and you may not get back the full amount invested. Seek independent advice if necessary, before buying a subscription to use our services.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Four common questions we ask ourselves while holding a losing trade

In today's article, I am focusing on four questions that many of us most likely ask themselves when facing a floating loss from a losing trade order or series investing in financial markets.

Victor Tomov | 07:30, 2019/05/29

Dear aspiring investors,

No matter how significant is our trading experience, one thing is for sure - we all face losses sooner or later when investing in financial markets. There is no trading strategy that can be 100% right all the time. It does not work like this in trading. Although this is pure common sense, it's quite challenging to accept it when we face a floating loss generated from a losing position or series and remain calm with a cool head. In such a situation, we often ask ourselves the following four questions:

  • Did I make the right decision to enter the market that early?
  • Should I close my position now to avoid a loss?
  • Should I put a tighter Stop Loss?
  • Should I open another position in the same direction hoping for a reversal?

The quick answer to all of them is "it depends" as there are certain factors that could influence our decision:

The risk we have taken when opening the losing position - the size of the trade order, the margin it requires, the current margin level in our trading account, our total exposure, the funds we have and could allocate, the loss we could afford while holding the position. Doing the math before opening a new trade is critical for us to have the confidence that even if we didn't get it right at the beginning, we have some room to breathe.

The investment objectives we have when entering the financial markets - to get rich faster, to become financially independent, to have an extra source of income, to buy this fancy new car, to go on a long distance holiday with the family next summer and so on. The nature of your objectives will define your investment horizon (long-, mid- or short-term), style (intraday, swing, scalping, etc.) and strategy.

The lifecycle stage we are at - recent graduates, having family and children, career phase (starting, established, retiring). It's one thing if we are entirely on our own without being responsible for other people and another if we have a family with a few children and are responsible for the household budget. When we invest our hard-earned money, we tend to be much more sensitive to losses than if we won a lottery price or have other income sources not directly connected to our efforts. When we are young and ambitious, we tend to be riskier, and a 200 EUR floating loss seems not a big deal, which is not the case with the older ones of us.

The mindset and mentality we have when trading - the speed we want to see results from our actions, the risk tolerance (conservative or aggressive), the hazardous component in our behaviour, the confidence we have in our skills and knowledge, our attitude (optimistic or pessimistic). A mixture of culture, education and experience shape our decisions when investing, and we can explore such factors by self-reflection.

The diversification of our investment portfolio - the number of investment instruments on which we are willing to trade and have open positions. We know the old saying "never put all eggs in one basket". It can't be stressed enough how important it is to be able to diversify our portfolio while keeping an eye on our equity and margin levels to avoid overleveraging the account. Very often, losses in one market are compensated by profits in another. 

The list may continue, but let's look at some possible answers to those four questions to illustrate the diversity of outcomes and their nature.

Did I make the right decision to enter the market that early?

A classic example of the optimism vs pessimism case. Is the glass half-full or half-empty? Good or bad, we made our decision to open that trade, and now we have to accept it. If we see a potential for reversal combined with other factors such as a positive swap, we may be confident that the decision was reasonable. If we are too stressed about our circumstances, we may start blaming ourselves for being so short-sighted and premature in trading.

Should I close my position now to avoid a loss?

"Yes, I should do it" - the ideal answer if we are close to a margin call or do not like risking too much while answering the first question negatively. "I will keep it open for a while" is a standard answer when our account equity allows us much room to breathe, and we never invest the money we could not afford to lose.

Should I put a tighter Stop Loss?

Reaching this question means that we passed the test of the previous two and consider limiting the total risk exposure. Again, looking at the chart and the overall fundamental picture of the respective market could guide us to the right answer based on our account equity. Moreover, if we have diversified our portfolio to a reasonable extent, we may well limit the loss in a losing trade, offsetting it with a good profit in another. In such cases, we are most likely to answer this question positively. After all, closing a losing trade frees up margin for opening a winning one.

Should I open another position in the same direction hoping for a reversal?

There is always a piece of hazard in our actions when trying to prove that our decisions are right. The hope for a reversal is the main driving force for many of us when trading against the trend. When things get ugly, the temptation to confirm our strategy with another order gets high, especially if we can afford higher floating losses. Using technical indicators to analyse the market conditions and define the entry level is critical if you answer positively to this question. This new trade could be a pending order if you spot an approaching long-term price top/bottom or a stable resistance/support level. That's why it is vital to read technical analysis articles available.

There is no right answer to these questions and also no silver bullet. Investing in financial markets is complex but also could be very rewarding once we get a good grip of it. It comes with experience and reflection.

Warning:

Disclaimer: This article presents the personal opinion of the author based on individual experience and past results. None of its content shall be considered investment advice. Past performance does not indicate future results. It is your sole responsibility to decide whether to follow any presented techniques or approaches and neither the author nor Findilao Ltd can be held liable for an outcome from your actions.

Risk Warning: Trading Foreign Exchange and Contracts for Difference (CFDs) is highly speculative and may not be suitable for all investors. The leverage created by trading on margin can work against you as well as for you. Only invest with money you can afford to lose and ensure that you fully understand the risks involved. You should be aware that your investment may go down as well as up and you may not get back the full amount invested. Seek independent advice if necessary, before buying a subscription to use our services.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Investing in financial markets - are you ready for the long ride?

In today's article, I am focusing on two often overlooked but critical factors for the success of any investment in the financial markets - patience and determination.

Victor Tomov | 07:39, 2019/05/20

Dear aspiring investors,

Many of you who trade with real money risking their capital know that feeling of anxiety when the price starts moving in the "wrong" direction.

It is the time when we start asking ourselves questions like:

  • Did I make the right decision to enter the market that early?
  • Should I close my position now to avoid a loss?
  • Should I put a tighter Stop Loss?
  • Should I open another position in the same direction hoping for a reversal?

The opposite is also valid. When we got it right, and our position starts accumulating profits, we face another set of challenging questions:

  • Should I collect the profit and close my trade now?
  • For how long should I wait until I close the position and get a good profit?
  • How likely is for a reversal to happen?

The answer to those problematic yet critical questions is not straight-forward and depends a lot on your experience and the strategy (investment approach) you are applying, but also on your circumstances and risk affinity. Each of those questions deserves a separate discussion. There are, however, personal qualities that you could practise and master so that you take the most out of any situation in the financial markets. Core values and principles that may guide your decisions.

Patience

Many experienced investors will tell you - "the market is here to stay, it ain't going nowhere". That's correct. It's quite similar to fishing and hunting where you patiently wait, sometimes for hours, for the big catch. It may seem that you got it wrong at the beginning, that your target is about to escape. It may even get out of your vision for a while, but it still there somewhere. You need to be patient to get there. In financial markets, this patience comes with a set of prerequisites:

  • enough account balance/equity to sustain temporary floating losses
  • good overview and understanding of the historical price movements (usually forming well-defined waves or cycles - see the illustration below)
  • proper risk management (definition of optimum exposure and trade size)

Fig. 1 Example of price cycles in a GBP/USD daily chart

Considering the above, we may also compare investing with cycling - if you are well equipped, hydrated and fueled, you may sustain the long run and reach eventually your profit target going through the tough phases hours, days or weeks ahead. Just like enduro races, you push hard mentally to achieve your goals.

Analysing the market conditions to define your entry point is another topic that I will discuss in a separate article as there are scenarios where waiting can be quite profitable.

Determination

When you first started investing in financial markets, you must have had a reason for that - getting wealthy or financially independent, growing your wealth at rates much higher than those on savings accounts, earning for your next holiday in an exotic location, saving for the education of your children and so on. All these reasons define further your investment approach and the markets you select (usually those you know best).

Once you open your first trades, it's critical always to keep your objectives in sight to remind yourself where you are going. In panic-like market conditions where volatility increases significantly, your willingness to keep going, even at the expense of some losses, is what could make the difference and help you achieve your goals. No pain, no gain is the old saying, but it is so true in every aspect of our lives. It does not matter if you trade manually or use an automated investment system; your determination is what keeps you going. Few rules of thumb boost it:

  • Never rely on investing for a living. Financial markets are highly speculative. Hence, you should allocate there only extra funds that you could afford losing.
  • Start small and slow enough. The going will get tough sooner or later, so make sure that you do not exhaust your resources right after the start and set a comfortable pace according to your risk tolerance.
  • Losses are inevitable but not unrecoverable. You could offset every loss sooner or later.

Getting mentally ready for the long ride of financial investment is as essential as having the funds needed to start your journey. Through self-awareness and reflection, you will be able to evaluate your personality and select an approach that best fits it, facilitating your patience and determination. If you do not feel ready to spend the time needed for full-time manual trading, you may consider automation to a certain degree or even delegation of funds to professional portfolio managers. However, no matter which way you choose, you need to have enough patience to navigate through market turbulence and determination to stay on track after the first bump.

Many lose sight of their objectives when they face some difficulties and give up to realise the chances of profitability missed afterwards. Financial markets are here to stay. With or without your participation - it's up to you. My company Findilao and I are here to help you make wise investment decisions.

Warning:

Disclaimer: This article presents the personal opinion of the author based on individual experience and past results. None of its content shall be considered investment advice. Past performance does not indicate future results. It is your sole responsibility to decide whether to follow any presented techniques or approaches and neither the author nor Findilao Ltd can be held liable for an outcome from your actions.

Risk Warning: Trading Foreign Exchange and Contracts for Difference (CFDs) is highly speculative and may not be suitable for all investors. The leverage created by trading on margin can work against you as well as for you. Only invest with money you can afford to lose and ensure that you fully understand the risks involved. You should be aware that your investment may go down as well as up and you may not get back the full amount invested. Seek independent advice if necessary, before buying a subscription to use our services.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.

Victor Tomov has more than six years of extensive hands-on experience in the financial industry gained in different management roles. Passionate about marketing ethics and confident in the success of any customer-driven organisation, Victor leads Findilao's business operations since the company's establishment in early 2018 offering diverse solutions for sustainable investment growth that help investors make wise decisions and monetise financial expertise. He has a Masters in Corporate Marketing from the University of Economics in Varna, Bulgaria. Victor's strong analytical skills proved to be instrumental in the development of his views on trading.