Computerised Trading Systems for Beginners
New traders are often enticed to start trading using computerised trading systems or, as they’re sometimes known, “black box” systems. These programs tend to be sold by high pressure sales companies that make the world of trading and profits sound remarkably simple and low risk – buy the software then each day push the green button for buy and sell signals. However, as always, if it sounds too good to be true it probably is.
A black box refers to a strategy where you are told the rules to follow but the seller does not reveal the specific strategy or “secrets” behind the buy and sell signals. Before you start trading a black box system you need to ensure that it suits your investment needs, personality and circumstances.
Some important questions to ask before committing to a black box system (or any trading system for that matter):
- Ask the vendor if they trade the strategy with their own money. If not, why not?
- Is the vendor licensed with ASIC – a requirement to sell such software.
- Have you been sold to with high pressure tactics?
- Are the returns and risks being offered realistic? Remember – if it sounds too good to be true, it probably is.
- How much capital is required?
- How many trades does the system generate?
- Do I require a specialist broker or can I use any broker?
- Do you have enough time and discipline to operate the system as required?
- Are there ongoing costs?
Even if you decided to purchase share trading software it’s imperative to firstly understand the basics of the stock market and how it operates.
If you do decide to trade using a black box system start by paper-trading for several months before placing real trades and risking your hard-earned capital.
Keep a trading diary during this time. Results should be recorded as close as possible to reality, along with your emotions at the time. This can be reviewed to ensure you have the temperament to trade the system and that the system is performing as you would expect.
Once you are happy with your trading system you will need to open a broking account to place your trades. An online account such as SelfWealth or E*Trade will enable you to run your strategy easily and with minimal cost.
Remember, trading should be treated as a business. You should start a business with a plan. The same goes for trading – plan your trades and trade your plan.
If you are interested in purchasing a trading system that has been thoroughly tested and the rules are fully disclosed. Have a look at our Turnkey systems, which are ready to be run on our trading software of choice RealTest.
Having realistic expectations is essential to enjoying the trading journey. To find out more, take our no obligation 2-week trial.
