📎The Truth About Automation

What is Automation?

Automation is the use of technology to perform tasks with where human input is minimized. This includes enterprise applications such as business process automation (BPA), IT automation, network automation, automating integration between systems, industrial automation such as robotics, and consumer applications such as home automation and more.

The Basics

  1. Plan Your Trade:

    • Conduct marketing analysis.

    • Plan and strategize your trade based on the market conditions.

  2. Place Your Trade:

    • Wait for the right conditions to execute your trades.

    • Place trades as per your planned strategy.

  3. Manage Your Trade/Account:

    • Actively manage your positions.

    • Monitor equity and make adjustments as necessary to meet your trading goals.

This three-step approach encapsulates the key components of a trading process. Each step requires careful consideration and discipline for successful trading.

Real World Application

Automation is a powerful tool, akin to having a smart assistant in your trading journey. However, like any powerful tool, it can be a double-edged sword. The key lies in understanding how and when to use it.

  1. Oven Analogy:

    • Automation in Action: An oven automates the cooking process, allowing you to set the temperature and time, then focus on other tasks.

    • The Lesson: Imagine leaving a meal in the oven without considering the recipe or appropriate settings. The result? Potential disaster. Similarly, in trading, automated tools need precise settings and a well-thought-out strategy.

  2. Car Analogy:

    • Automation in Action: A car automates the process of transportation, freeing you from the need to walk everywhere.

    • The Lesson: Now, picture a car without a driver who understands the rules of the road. Chaos would ensue. In trading, automation demands a clear roadmap (strategy) to navigate the market effectively.

  3. Blender Analogy:

    • Automation in Action: A blender automates the task of crushing ice based on the chosen setting.

    • The Lesson: If you don't choose the right setting or overload the blender, it might struggle or break. Similarly, in trading, choosing the right parameters for your automated tools is crucial for success.

Applying the Lesson to Trading:

  1. Learning First:

    • Before embracing automation, traders must understand the market dynamics, risk management, and various strategies. It's like learning to drive before relying on cruise control.

  2. Precision in Settings:

    • Automated tools in trading are only as good as the settings you choose. Just as you wouldn't set an oven to 500 degrees for a delicate dish, you need precision in your trading parameters.

  3. Strategic Application:

    • Automation should be strategically applied where it adds value. It's not about automating everything but about choosing the right tools for specific tasks.

When to Use Automation

  1. Repetitive Tasks:

    • Example: If you have a strategy that involves entering trades at specific support levels, you can automate the execution based on those levels. This ensures you don't miss opportunities during repetitive market conditions.

  2. Precise Timing:

    • Example: Suppose your strategy involves taking advantage of price fluctuations during specific hours of the trading day. Automation allows you to precisely time your entries and exits, ensuring you capture optimal market movements.

  3. Risk Management:

    • Example: Utilizing automation for setting hard equity stop levels based on max daily profit or loss parameters. This ensures consistent risk management and prevents emotional decision-making during market fluctuations.

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