Automated System Trading
Futures System Trading Products offered by DeCarley Trading
We are partnered with a system vendor who has conducted due diligence on a handful of system developers, and over 300 systems, which have proven to be relevant. While past performance isn’t indicative of future results these systems have established track records. DeCarley clients choosing to participate in system trading are provided access to a database of live systems in which they can initiate, and cease trading, of a particular system with the click of a mouse. These automated systems are 100% platform based, and controlled by the client. Thus, there is no need for a Letter of Direction or any third party execution service.
Our systems can be executed in accounts with Gain Capital, Rosenthal Collins Group, Dorman, and more.
What is an Automated Futures Trading System?
An automated futures trading system is a defined set of technical rules and parameters that ultimately determine entry and exit points for a given contract. In the event that all of the stipulated technical events occur, a buy or sell signal is created and a trade is automatically executed without human intervention.
Each system is comprised of specific ingredients and circumstances, but they most commonly involve moving averages, stochastics and other computer-generated oscillators.
As you can imagine, the results are highly dependent on how well the rules perform in various market conditions. Accordingly, system developers spend an incredible amount of time optimizing the system to manage risk and increase the odds of profitable results in any environment.
Why use a Trading System?
1. Eliminate Emotion - A majority of unsuccessful traders are the victim of fear and greed. An automatic trading system reduces the impact of human emotion.
2. Time Saving - System traders have the luxury of having a day job and or the freedom to step away from the computer during market hours. Trading rules are pre-determined and execution is automatic, whether you are watching or not.
3. Convenience - Let others do the work for you. We provide 24-hour surveillance of several trading systems in which we have formed strategic relations with. All you have to do is keep an eye on your statements at the end of each day to ensure that you are satisfied with the results.
4. Like Markets, Systems can be Traded – Speculators can actively trade a futures system performance by implementing and ceasing trading of the system based on the peaks and valleys of returns. For example, it may be an opportune time to begin trading a system that is experiencing a drawdown and call it quits after a good run. This is because market conditions often fluctuate in cycles in which the performance of technical futures trading systems will also oscillate.
Drawbacks of using Automated Trading
1. Systems don't have Common Sense - Because systems are driven by technical analysis rather than human discretion they will often generate signals that may be considered low probability trades. For example, a system may generate a sell signal in a market that is at an all time low or a buy signal at or near a contract high.
2. Back Testing isn't Necessarily Reliable – Systems are often developed through a process known as back testing. However, back testing simply gives you information on what the system would have done if implemented in the past. It isn’t reasonable to infer that the same results will be obtained in real time or at any point in the future.
3. Markets are Constantly Evolving – Similar to the flaws of back testing, system performance at any given point may or may not reflect its ability to operate profitably throughout time. This is because market conditions are dynamic but system parameters are typically constant. While system developers can tweak the parameters in order to enhance performance, considerable losses may be sustained prior to recognition of a need to adjust parameters.
4. Trades may be Contrary to your Opinion – System trading eliminates the emotions involved in making the decision of entering or exiting a market but it can be challenging to watch the system execute a long trade in a market in which you are personally bearish.
Do Automatic Trading Systems Work?
Let’s face it, if making money in the markets was as easy as buying or leasing a trading system and quitting your day job then everyone would do it. Unfortunately, it is far more complicated than that. There are an unlimited number of trading system and software sales representatives that will do whatever it takes to convince you that their product is capable of consistent returns in all types of market scenarios. However, we have yet to find such a “holy grail” of trading.
With that said, there are legitimate systems that have proven to be productive over time and in the right circumstances. One of the most infamous trading systems was developed by Richard Dennis and Bill Eckhardt, known as the Turtle Trading System. The Turtle System has enjoyed years of success and can be evidenced by the financial accomplishments of its developers. Additionally, many hedge funds and institutional commodity traders have adopted system trading as their primary method of speculation. Perhaps this suggests that they can be a viable market tool.
Beware of trading systems that promise spectacular returns. When it comes to futures system trading, if it sounds too good to be true it probably is. You must realize that many of the system creators and sellers aren’t required to register with the National Futures Association; as a result, they enjoy freedom of speech without accountability. Not all system vendors abuse the privilege but some do and you owe it to yourself to get the facts before putting your money on the line. As a consumer, it is imperative that you know who you are dealing with and what is realistic in terms of performance.