Technology is coming to the rescue of traders who fall into the deadly trap of allowing emotion to interfere in the execution of their strategies.
Developers of trading algorithms know the importance – and the limitations – of backtesting trading strategies and then applying them to real-time market conditions. Until recently, only those with some computer programming experience could backtest strategies, but that’s no longer the case. IG Markets’ advanced charting system can be used by anyone, regardless of their computer knowledge.
“Many successful traders employ trend-following systems, which even though they may not have the best win/loss ratios, their winning trades more than cancel out their losses. These can include economic news such as the release of unemployment data in the US or SA, inflation or manufacturing data, as well as price alters – such as when a currency pair moves more than, say, 2%. Another powerful tool is the ability to set technical alerts, such as when the 20-day moving average crosses through a 60-day moving average.
For example, you can graph your trading history and easily see the size of your average losing compared with winning trades. You can also analyse the fees paid while in the trade, and assess whether you were in the trade long enough to warrant that particular trade. If not, perhaps a change in trading style towards longer trend-chasing trades is required.
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