5 Differences Between Algorithmic Trading & An Online Trading Course

If you are new to algorithmic trading or algo trading, then you might be curious to know what the differences are between this style and some other style of trading which focuses on teaching the individual to trade via some kind of online trading academy.

1. Minimize the emotions involved with trading.
2. Minimize the potential for human error.
3. No need to watch the markets all day.
4. Trades are placed following a strict algorithm, nothing is left to subjective opinion.
5. Take part in a sophisticated pattern recognition algorithm that has been time tested.

1. Minimize Emotions Involved With Trading

There are numerous styles of trading in existence. One major problem with all styles of trading (including algorithmic trading) revolves around the emotions involved with trading. To put it plainly, even if you had the exact rules of a system that could generate amazing returns, most people reading this right now would not be able to follow them. Anyone who has traded enough to witness both a bear and bull market know this all too well.

I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.

Richard Dennis

Technical Trader & Mathemetician, Turtle Trading Project

2. Minimize The Potential For Human Error

Even if someone could have the emotional discipline to follow their trading system rules, as taught in the trading course they have been through, there is still the possibility for human error in the form of a fat fingered trade or by simply misreading the chart or misunderstanding the rule.

The reasons why people make mistakes have been well identified and classified by academics. Each of these is relevant to the trading discipline, though some more so at an individual level and others at a team-based or organizational level:

  • Ignorance/lack of sufficient knowledge
  • Lack of effective training
  • Memory lapse
  • Inattention
  • Exhaustion, fatigue
  • Noisy working conditions
  • Poorly designed technology/equipment
  • Poor communication/failure to communicate
  • Personal factors
  • Other environmental factors
Author Unknown

Etiology Of Human Errors In Trading, Seeking Alpha

3. No need to watch the markets all day

Watching your monitor all day can be a great way to lose your mind trading. In many cases, it’s simply not an option – especially if you have a day job or simply can’t watch the markets due to other commitments.  With an Automated Trading System such as the Swing Trader, this is not a concern since trades are placed automatically following the trading system.  Watching charts all day is also a good way to over-trade and blow through your account.  It takes an incredible amount of discipline to watch the market all day waiting for the setup that was taught to you by one of the online trading courses.

4. Trades are placed following a strict algorithm, nothing is left to subjective opinion.

During most trading courses, the presenter might provide some rules such as: “Once the touches the 20 Period Moving Average, place a buy order”. They might also say: “If it breaks below the 20 Period Moving Average, you should sell”.  Another strategy might say : “Draw a trend line and buy when the stock touches this trend line, sell when it breaks below the trend line.”. This is very subjective since many important details are left out such as:
    • Do you use the closing prices when drawing a trend line or do you use the low of that day?
    • When selling, do you do this on any intra-bar touch below the trend line or moving average, or only when it closes below this?
    • What candle sizes do you use for the 20 period Moving Average: 1 minute, 5 minute, 1 day, 1 week, etc ?
    • What session times should you use? Do you include after market trading hours when drawing trend lines or computing moving averages or just normal market hours?
If you contrast this with an Algorithmic Trading Technique, you will quickly see that the differences are profound. This is because with a trading algorithm vs a strategy you might learn in a trading course, the trading algorithm will force you to consider all of these details. Nothing is left to subjective opinion.

Check Out The Performance Of The Swing Trader

5. Utilize a sophisticated pattern recognition algorithm that has been rigorously tested.

It’s actually relatively easy to come up with the idea of a trading strategy. The real work involved is testing the trading algorithm in a consistent and robust way. During many online trading courses, you might hear the instructor make a statement regarding trading, without giving a mathematically tested, robust defense of this “fact”. In algorithmic trading, since back-testing and walk-forward testing is (or should be) part of the design methodology, the strategy will be analyzed for multiple time periods to include bull and bear markets. At AlgorithmicTrading.net, we test our algorithms across multiple market cycles to include Bear and Bull markets. Most of the trading tips you find online are sadly lacking an analytical approach to defend the statements which are made. Comments are made and repeated that simply don’t have any empirical evidence to back them up. Quantitative Trading is quite a bit different when compared to an online trading class – in that most systems have back-tested reports, walk-forward analysis and even live trade histories to back up claims made.

 

Final comments comparing your typical Online Trading Class to an Algorithmic Trading Strategy.

These five differences are really just the start.  While there is an appeal to online trading classes, sadly many would agree that the content is too basic and simply never gets to the “good part”.  With Algorithmic Trading, nothing is left to interpretation.  Individuals utilizing any given strategy, with the same broker and assuming they don’t interfere with the trading system, will most likely see the same fills. The algo will place trades as it sees fit and will attempt to generate positive returns as trades are methodically placed on individuals accounts. There is no staring at charts, no drawing of trend lines and the negative emotions involved with trading are minimized. Lastly, the potential for human errors is minimized since trades are placed automatically by the Automated Trading System as opposed to signals learned in an Online Trading Course.

 

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Consider Using Our Swing Trader Algorithm

Minimize Your Emotions

Instead of struggling with the same issues as before, consider utilizing our algorithms so that you don’t have to be involved emotionally.  While it is impossible to fully eliminate emotions in trading, you can certainly minimize their impact. Do this by using one of our Trading Algorithms such as The Swing Trader.  

100% Automated Futures Trading System

The Swing Trader is a fully automated futures trading system, with zero time commitment required. Receive real-time trade alerts on your phone, and daily statements.

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Has Traded Live for Over 2 Years

The Treasury Note Algorithm was last optimized in December 2014 while the momentum algorithm in October 2015.  These two algorithms have been our most successful algorithms and were selected for this package based on their walk-forward/out-of-sample performance. Visit our Algorithmic Trading Statements page to see actual statements from accounts trading this package.

Liquid Market Traded

Places swing trades on the S&P Emini Futures (ES) and Ten Year Note (TY) – two of the most liquid futures instruments available.



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Unless otherwise noted, all returns posted on this site and in our videos is considered Hypothetical Performance. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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