Top 4 Algorithmic Trading Mistakes You Need To Avoid

If it's your first time stepping into the trading world, getting fascinated by the concept of automated trading is highly likely.

11:36 31 July 2019

However, before you go on using a bot with your live account, it is crucial to get yourself equipped with ample knowledge.

Learning about several mistakes newbies make while starting with automated trading will help you keep these at bay. Thus, you will remain mindful of the safest trading measures along with leveraging technology for placing the most profitable trades.

Going ahead without backtesting

While there’s no holy grail when it comes to figuring out a trading strategy, leaving behind backtesting can doom your trades. This is exactly why experienced traders tend to spend a significant amount of time assessing the essential changes that backtesting renders.

Without backtesting, any automated trading strategy will fall flat as you haven’t tried it out against historical data. Therefore, take ample time until you get your hands on a working strategy that shows decent results with years of backtested data.

Ignoring frequent system shutdowns

While you’re running a reliable software for Algorithmic trading, it’s utterly essential to ensure that your system doesn’t shut down abruptly. Not having a secure electricity backup might not only make you lose a crucial deal but also prove devastating for your trading portfolio.

Also, be watchful for system settings as sudden Windows upgrades are often set up to auto restart the device. Ensure that your machine remains active and running throughout the trading period, and any of these factors don’t go unattended. Moreover, check whether your computer might get into sleep mode right after a few minutes of inactivity and change the settings accordingly to keep your automated software running uninterruptedly.

Making abrupt changes driven by emotions

Trading in Forex is often identified by some consecutive losses and at times, these might occur 6-7 times in a row. However, suddenly making any alteration to the algorithm based on such repeated losses might actively prevent you from getting your hands on the next winning trade.

Therefore, managing your emotions while trading is unskippable regardless of the trading software you are using or the experience you hold. Failures are an inevitable part of the trading journey and should drive you to thoughtful analysis of your decisions instead of fine-tuning your software after witnessing a few pitfalls in a row.

Skipping adequate market research

Building a profitable and secure career in trading demands you to be thorough when it comes to conducting trading research. This includes learning about various market conditions and how trading strategies should be modified according to each.

Moreover, you also need to compare several Algo trading software in the market before you finalize the suitable one. Carefully chalk out its pros and cons and assess what features you will require the most. Also, not checking user reviews and testimonials of automated trading software is an avoidable mistake that newbies commit before investing their money. Do your homework honestly and begin with realistic expectations instead of dreaming of making a thousand dollar per day right from the start.