Why Robot Trading Doesn’t Work

Oct. 6, 2021

For most of us, it’s over before it ever gets started.

We say we want change, but we don’t really mean it.

For example, I’ve had many students come to me for lessons. They say they love tennis and want to get a college scholarship.

And then after the first loss they say, See? I told you I couldn’t do it.

It’s the famous old quote from Robert Pirsig,

“The truth knocks on the door and we say, ‘Go away, I’m looking for the truth,’ and so it goes away. Puzzling.”

Too often, it’s the same for our trading.

We say we want to quit our jobs. We say we want our trading to set us free. And when we come across some research that would actually do what we say we want to do, we tell it to go away.

If robot trading really worked, everyone would do it.

End of story.

Except it isn’t.

Millions of people are using automated strategies to trade for a living, albeit not in the way we might think.

How many Mustachians use automated trading to fund their “financially independent” lifestyles? Well, Mr. Money Mustache (MMM) gets over 1.5 million visitors per month, so it’s safe to say, “Quite a lot!”

Are they robot trading, though? Yes. Kind of. These zealots AUTOMATICALLY put money into an index fund every month or every year. Without exception. Regardless if the market goes up or down. They have an automated strategy to “trade” the market by buying it and never letting go.

This has worked perfectly for MMM and presumably for thousands of his followers.

Then you have all the 100% automated funds that have destroyed the market over several decades. Dunn Capital, for example, has returned a compounded rate of 19% per year since 1974. Again, they’re 100% automated.

Could traders change their lives forever with these automated, robotic strategies?

Of course.

But it doesn’t matter what evidence is out there. If we think it can’t be done, then it won’t be done.

We’ll tell every solution to go away.

The reason robot trading doesn’t work is us.

With a notable exception.

Sometimes it doesn’t work because the system being sold to us is a piece of garbage.

And we’ll talk about that in the next Newsletter.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.