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Friday January 22, 2021 - 14:57:17 GMT -

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Do Automated Trading Algos Work?

Imagine yourself sitting on the beach sipping a cold drink, turning on your automated trading algo, and watching the profits roll in. Well, dream on. There is no free lunch in the trading business. I wish there was but such is not in the cards. To prove my point, I have done some research that I will share with you.

I spoke with three individuals plus myself who have tested automated trading strategies. While the sample is small, each has extensive experience testing algos:

  • One person hired a team of quant types to produce a suite of automated trading strategies. In each case none of the strategies stood the test of time and eventually either stopped working right or outright imploded. This was undertaken using programmers with top mathematical skills that ended with disappointing results.
  • Another person tested many automated trading strategies that could be offered to clients as managed accounts. Here, too, the strategies proved disappointing as most eventually “blew up” the accounts, even the ones that started out making money. Some only worked in certain market conditions and could not adapt when conditions changed. Others got blown up by surprise news headline reactions. This firm has since switched its approach to offer strategies executed manually by experienced prop traders,
  • My developer has extensive experience programming automated trading strategies. He said that he has “worked on over 1000 programs and the only ones that had a chance of succeeding were those that included human intervention.”
  • I personally spent time trying to automate strategies using the Amazing Trader. What made this approach unique is that the logic performed in all market conditions. However, the challenge was to avoid getting chopped up by false starts. While I was able to mitigate some of the chop it was not enough to satisfy my high expectations.

So, I decided to combine the best of all worlds. I took the logic of my algo and turned it into a manual trading system. In other words, I think as if my algo is trading but filter out what I see as false starts, only focusing on what I identify as higher probability trade setups. In other words, trade like an algo would but control your trading decisions.

Many of you have seen me talk about the AT Ladder Strategy. The essence of it is my automated trading algo traded manually with human intervention. To see the loigic behind this strategy, click on the following:

AT Ladder Strategy Logic

Feel free to contact me by reply email to agree, disagree, share your experiences and/or ask me for further details.


Jay Meisler



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