The advent of of automated trading, and particularly high frequency trading (HFT) is the buzz of the investing world and the professional industry of brokers, investors, and institutions that engage in it are both impressed by its potential and wary of its risks. In less than 10 years “algo” based trading, particularly in the Forex world, has become a holy grail of investing with its promise of easy returns without the steep learning curve live traders once required.
While algorithmic trading offers a chance for smaller investors, funds and large institutions to participate and benefit from the work of successful traders through automated trade signal copying (through a MAM or PAMM account), the entire Algo based forex market is a wild and uncertain arena. As in any investing pursuit, it is a buyer beware scenario and evidence of results can be hard to come by as every good story offers the promise, but not always the proof.
Even more troubling is finding successful systems to copy only to discover that the trading strategies are only as good as the traders behind those strategies, and once the markets change, which markets always do, even once-successful strategies tend to lose effectiveness without constant upkeep and management. What experienced algo hunters have learned, painfully, is that even when they find a good trading system, it does not necessarily hold up. It is rightful for brokers to warn any trader that “past results are not indicators of future performance”. That warning is there for a reason. But one of the biggest reasons that once-successful systems crash is greed. Traders are aiming too high, showing enormous growth and eventually either the market turns against them, in just as high leverage as the equity increase, or they are too highly leveraged for safety.
At Algo AI, we have taken a decidedly different approach. We have a smooth equity curve in pursuit of Alpha. We don’t trade with anything but ECN’s and we have a strict capital preservation model. We never use more than 40:1 leverage, which is decidedly small in today’s marketplaces, and our DAISY managed system always maintains strict adherence to our risk settings, automatically and if any strategy becomes ineffective, we can see it in real time. We don’t have to “retool”. We do it all in instantaneously as the market changes, even inside an open trade.
There is simply no other system safer in protecting your capital than Algo AI.