Future Trading Robot Development

monarchcb.com - If you are a fan of objective fantasy films, you may have seen a film about people who fight against machines, the illustration is Terminator. There is no need to fantasize, as a real trader you are fighting against machines every day. Right, not wrong. Today man-machine trading is the latest trend in the world of finance. The world of trading today is dominated by human machines with artificial intelligence. This matter is not free from increasingly sophisticated technological advances. This post will discuss the origins of the use of human trading machines and how we need to react to it.

What Is Human Machine Trading?

Human trading machines are actually a form of automated trading (automated trading). The trading business is conducted entirely automatically by software and based on programming algorithms (often abbreviated as algo). This software works by itself and people just make changes to program standards. Do not reflect a trading machine human as in an objective fantasy, but a trading machine human in the form of an application located on a server (a high-performance PC). So tomorrow's future traders are file servers that carry out automated trading.

Human trading machines or automated trading are often referred to as algorithmic trading. Usually every trading machine man has his own strategy and algorithm, which is made by the maker. This strategy and algorithm is called blackbox, referring to its secretive character. As a result, human trading machines are often called blackbox trading. Every major institution that plays in the financial markets has its own blackbox, for example Chameleon (bred by BNP Paribas), Stealth (bred by Deutsche Bank), Sniper and Guerilla (bred by Credit Suisse).

Retail traders are also now starting to use human machine trading. For example, what is quite uproar is being tried by stock traders with their respective online trading applications. Or forex traders, goods and indicators with Expert Advisors (EA) in MetaTrader.

Human Progress Trading machine

The origins of automated trading in financial markets date back to the 1970s when large traders were able to execute automated trading contracts on the Chicago Mercantile Exchange. The next stage was made in 1999 when the internet industry produced its first dedicated retail forex app, which provided traders with the tools to buy and sell currencies directly on the forex market.

Now human trading machines can receive information from the market and algorithms can identify market opportunities, make buy or sell decisions and process them in a matter of only milliseconds. So even before you get the chance to read the information, human trading machines have already walked the market.

The progress of using human trading machines is very fast. One third of all European Union and American Syndicate stock trades in 2006 were made by human-machine trading. In just an interval of 3 years, in 2009 the use of human machine trading became close to 60-70% of all stock trading capacity in the US. For information, currently human machine trading is used in more than 80% of financial trading businesses, ranging from stocks, forex, goods, futures and the like. All important actors, such as banks, capital budgets, and financial institutions have used human machines for trading. You could say it is one of the types of trading that traders and retail investors are trying to guide.

In Indonesia too, the trend of using human trading machines is expected to continue to spread, along with the soaring consumption of online trading applications.

Advantages of Human machine Trading

There are several advantages of using human trading machines:

The most significant profit from the trading machine man is the complete elimination of the intellectual factor that goes into trading. As a result, basically it is hoped that human trading machines can eliminate human errors.
The second profit, is the large volume of business that can be created and then penetrated. A trading machine man can do business all the time on all markets, practicing the same algorithm over and over again, without time lag.
The third advantage is dexterity. Human trading machines can do business very quickly. If it is analogous to a kind of electron dexterity. The first time the trading machine man was published, the dexterity aspect became an advantage. But as the number of human consumers of trading machines continues to grow, the agility aspect is no longer an important profit.

Due to the use of human trading machines

The use of human trading machines to produce trades with a distinctive characteristic is big wave trading (High Frequency Trading or HFT). The trading machine man does business in a large capacity and then penetrates every time. Usually HFT just looking for a small profit, but in a large capacity.

Because the trading capacity that is tried is very large, if there is a mistake in the business it can have a great impact. As an illustration, there are 2 serious problems in using automated trading:

Flash Crash. On May 6, 2010, the US stock market experienced a sharp decline. The Dow Jones Industrial Average fell 9% or 1,000 values in just a matter of minutes.
Knight Capital. On August 1, 2012, Knight Capital Group's algorithm created chaos in the stock market. In the end, Knight Capital ended up 4 times its net profit in 2011.

Do We Need To Use Human Trading machines?

In March 2014, Virtu Financial, an HFT industry, reported that over the past 5 years it has successfully executed 1277 profitable trades from 1,278 days. So Virtu only loses in one day in 5 years. The claims submitted by Virtu may convey the message that human-machine trading can be profitable.

But not all human trading machines can be profitable. In order for human trading machines to be profitable, they must have 2 conditions: 1. A great algorithm. 2 Extremely fast servers.

As retail traders we don't have those 2 conditions. Flash servers are very expensive. Algorithms that are more powerful than those of the institutions are also difficult to make. It takes intellectual expertise and huge fees for study to create the algorithm. Don't compare it to the algorithms belonging to large institutions, such as human beings, gibberish trading machines that are distributed free or sold economically on the internet. If that's the case, it could be that the conclusion makes the trader injured.

For me, although the trading machine man continues to be in an uproar, it is basically an extension of people's anger. Human psychology is working great in the marketplace. And that psychology makes the market unpredictable, especially even by the most advanced algorithms. So there is always an opportunity for us, the dinosaur traders who are starting to perish, that is, those who are trading by means of the manual to make a profit from the market.