Tuesday, July 21, 2009

Are There Drawbacks?

There are some drawbacks to the trading systems. One of the most difficult things can be the complexity. This is sometimes not simple software to use. Developers of trading systems don’t always have their focus on the user-friendly nature of the system. Sometimes in an effort to get the system to do what it is designed to do, the streamlined of the user functions is not there. Particularly if a system is newer and has not had additional versions to work out the bugs and implement improvements you might find that you get a little frustrated trying to iron things out.

Like anything, there are scams out there. Lots of systems will promise things that are simply not believable. That is because you should not believe them. If you have seen the late-night infomercials with the guy who spends an hour a day trading and doesn’t even have to click then goes outside to play with the kids in the huge yard and poses beside the Mercedes then you probably know what I am talking about. If this system worked so well, wouldn’t the people that made it simply use it and play with the kids instead of making infomercials to sell it to you for $49.99?

Also beware of the pitfalls of slippage and commissions. Slippage happens on the forex trading systems, when the time lag between when you place your order and when the currency is purchased means that there is a difference between the two prices. For the securities market the commission has to be factored into the equation. If the commissions you pay on your trades catch up to the amount that you are making then you are working for free.

Some of them just plain don’t work. You might get something that looks really good on the screen but has been designed by some high school kid in his garage or basement and doesn’t do what it is supposed to do. If you want to evaluate which ones not to go with, anything that does not offer a free trial period would be a good start. Try it for a month and see how you do. If you do well then you can think about moving forward. Here is something to consider though; half of people will do better in real time and half of people will do worse. It is just the law of averages so be prepared that your success in the trial may not be matched when you get into the market.

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