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Striking the Balance in Your Trading Strategy
Posted by: Nicholas Kitonyi (IP Logged)
Date: November 30, 2016 03:24PM

The financial markets provide traders with the opportunity to make money pretty much from the comfort of their homes. However, that does not necessarily imply that they should be less involved unless they intend to rely on trading software entirely.

The financial markets have evolved during the last few decades thanks to advances in technology. Currently, there are more hedge funds that rely on trading robots to do their job than there were a decade ago – and according to recent developments portfolio managers are enjoying more success employing quantitative trading techniques.

In anticipating opportunities in quant trading, software developers have come up with trading programs that are aimed at helping novice traders make money in the market. These are typically suited for the currency markets, the commodities markets and other derivatives trading markets such as binary options, indices and futures trading.

For Forex, developers have coded rule-based trading systems commonly known as Expert Advisers while custom indicators are also frequently used in the trading community. In the binary options market, developers have come up with interesting trading tools that include robots and signals and according to experts, some binary options robots are obtaining up to 85% win rates.

However, as the financial trading education website, Investoo.com, notes in its review of one of the most popular binary options robots, past success is never really a guarantee for future results. Therefore, traders should always take caution before jumping in with both feet.

So how exactly do you strike the balance?

While algorithmic trading techniques and the use of robots have proven to be significantly successful in recent times, traditional methods of investing shouldn’t be swept aside entirely. Robots rely a lot on technical analysis and price history, but they cannot anticipate price movements when faced with economic uncertainties.

In fact, research shows that, without the input of fundamentals-driven investors, the financial markets would be totally a different animal to look at even for quant traders. As such, it appears that as a trader, it would be prudent to consider using both techniques of trading to balance your portfolio from the perspective of trading strategies.

Modern trading techniques suggest that even a novice trader who wakes up one day and decides to make money in the stock market could end up being successful within a few days or months. This goes against normal trading theories which, on the other hand, recommend gaining significant knowledge and experience before finally beginning to make profits year over year.

Now, in the case of the former, it would deem financial trading education worthless unless traders intend to roll out their own money management services at some point in the future. However, that’s not the case because even now, more individual investors continue to seek financial trading education from various platforms and materials. This suggests that while algo trading is gaining popularity, more people still want to know how to play the game without the help of robots.

The binary options market, in particular, has attracted different players. Some are in it to trade and make money while others seek to profit by providing auxiliary services such as binary trading robots and signals, and binary options trading education.

In the U.S., binary options trading is restricted with only a handful of brokers providing the service for exchange-based binary options, but in Europe, the market is more diverse.

Conclusion

In summary, there is no magic wand for succeeding in financial trading  whether it’s binary options, forex, stocks or bonds among others. Trading robots may provide an advantage, thanks to high-frequency trading, but as long as the future remains highly unpredictable, it will always be crucial to look at the underlying fundamentals while trading in any market or asset.

Trading robots can execute trades at exceptionally high speeds, but they can never tell when the market is about to tank, let alone predict a financial crisis.

The bottom line is that as a trader, it would be wise to prepare both ways by trying to gain as much financial trading education and experience as possible, and evaluating the best trading robots in the market. Even if you choose to trade short term, your goal should always be long term.

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