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A lot of people ask me how I feel about automated trading programs. These are the little bots in your system that look for a certain set of conditions and then execute a trade based on those parameters. It sounds good in theory, right? A program isn’t going to get fearful of initiating a trade or greedy when the trade nears its profit target. It isn’t going to be sleeping at night or going to a J-O-B or any other number of distractions from the charts so it can be working ‘round the clock. It isn’t going to doubt itself and wonder if this is the best trigger for the trade or the exit of the trade. It is going to just do what it is programmed to do. And, after all, isn’t that what we’ve come to understand is necessary in trading?! How useful is all of that automation, though, when market conditions change? And they will change.

What people don’t want to believe about the market is that it really is a fickle beast. It seems like it should be something that one can quantify easily with mathematics, statistics and probabilities. The problem is that not only are we dealing with price being driven by large money in the hands of emotional, opinionated and passionate human beings but these human beings are spread out across the globe meaning that there are different cultures, understandings, beliefs and methods upon which trading decisions are being made all day long. An automated trading system cannot easily identify when there is true consolidation in the market place versus just having a pause instead of a pullback. It cannot understand when the market is reacting to fundamentals in the marketplace or when it is reacting to risk perception. It cannot easily recognize a tiring of trend-side enthusiasm and make changes to money management when a system’s probability weakens.

I’m sure there are those that would argue that the bots are as sophisticated as the people who developed them and that they could, arguably, be programmed to recognize some of that. My response is generally this: by the time someone has programmed something to accommodate the current market conditions, the market conditions will already be changing.

If a trader believes that trading is simple enough that a program can do it for them, they’ve already bought into the losing belief that trading is simple. Trading is not simple and believing so will destroy a person’s account no matter the method that they’re trading.

If a trader believes that trading is a process outside of himself, then they’ve also lost the opportunity for personal growth that is necessary to become a consistently profitable trader. You cannot merely decide to trade, you must decide to become a trader.

You simply cannot automate the process of becoming anything; life just doesn’t work like that.