Ivo Luhse is Forex trader who started out, as so many traders do, as a discretionary trader. Now? He wouldn’t even call himself a trader, despite the fact he makes his living trading. He describes himself as an asset manager with a number of employees. And every one of those employees is a robot.
Ivo’s journey is one that all traders are going to have to make eventually. It’s not a matter of embracing complexity, in fact, it’s just the opposite. He uses simple manual trading systems but he lets the robots do the work. He just manages them and the money that they are using and making.
We all heard that you should treat trading as a business. But not many actually understand what it means.
He cites the analogy of a burger shop. He has bots flipping the burgers – he’s the manager looking after the money and checking up occasionally that the bots are making the burgers properly. And with the new advances in machine learning soon different bots will be managers of the bots flipping the burgers.
There’s Still Time To Get An Early Advantage – But Move Now.
Even a trader as sophisticated as Ivo hasn’t been doing robotic trading that long. He started to build his robots in early 2015. After the birth of his daughter, he realised that he doesn’t want to sit at the computer screen all day long and wanted to spend as much time as possible with the new family. So his started to build robots based on his manual trading strategies. He currently has four bots working for him each with is own unique trading strategy. This approach lets Ivo diversify his trading portfolio and achieve consistency in any market phase.
In every market, traders are making the same journey and turning to automated trading to give them coverage and consistency that is very difficult to achieve as a human being.
It’s extremely difficult for us not to hop from one strategy to another, particularly when we encounter trading difficulties and losses. But automated trading is far less emotional and can help you improve your profits by removing the heat from the trading scenario.
The whole market is moving this way and it’s important to give yourself the benefits of an early advantage by getting involved now with automated trading using robots.
When you look at hedge funds vs quant funds. Technology driven quant funds are on a good run and are outperforming its discretionary counterparts. Quant funds are also the biggest hirers, but there are no jobs for discretionary traders. Funds are looking for the smart, analytical people right out of undergrad with strong math, computer science or engineering skills.
If computers can beat world champion chess players, shouldn’t they be able to beat the traders on Wall Street?
Eventually, the time will come that no human investment manager will be able to beat the computer.
Ivo trusts the algorithms and strategies that are built into his automated trading robots. He has fully stopped his discretionary trading and has his sole focus on managing and developing automated systems.
But it took him some time to arrive at this point. At first, he found it difficult to let the robots do their job because it involved a loss of control – a bit like the business owner who takes on some employees but doesn’t believe they can do the job as well as he can. Most traders will probably have the same problems to begin with and will need to move towards fully automated trading somewhat gradually.
It’s clear that he moved towards robotic trading in a spirit of humility, learning what he needed to learn and wanting to move towards a mode of trading that was calmer and more rational. However, Ivo believes that in the next 20 years asset management of robotic traders is what will make money in the markets and that discretionary trading has no future.
A Different Kind Of Trading Day.
Traders like Ivo who are using automated trading systems check their robots 1 to 2 times a day to make sure that they are opening the trades correctly. Scanning charts, looking at indicators, fundamental analysis and all the other paraphernalia of traders have become a thing of the past – the software does it all.
With apologies to the revered Mr Graham, that may all be about to change. With machine learning, robots learn everything and forget nothing.
Already now Ivo uses testing robots that 24/7 scan the incoming price data and look for best settings for the current market conditions. While he still needs to manually input these settings for his trading robots, soon manager robots will be able to do this automatically from the data they receive from the tester robots and tracking robots.
A fully automated machine learning and trading process — trades taken by trading robots, settings set by manager robots, ongoing testing done by test robots and live trades monitored by tracking robots.
A Huge Wave Of Automation Is Coming.
This move towards automated trading is part of the new wave of intelligent robotics which will profoundly change the world of work and affect all jobs and professions where human intelligence is used to collect, synthesise, analyse and act on information. The changes will be dramatic and many people are simply unprepared for the scale of what is about to happen.
So far, most people’s idea of a robot has been of a machine with limited intelligence that does something physical in response to a set of instructions. What we are now seeing are robots that inhabit the virtual or digital worlds and act autonomously using our money, and resources. We will allow them to take decisions and act for us in the future because the evidence will plainly show that they take better decisions than we do. They will teach our children, diagnose our illnesses, manage us at work.
Robots will become socially intelligent and will be networked into complex interactive social and work systems.
The current push is to develop sentient robots – those who do not merely have artificial intelligence but who have self-awareness, or consciousness. Which of course means, that they would be capable of loving or hating but also that they could be taught ethics and a sense of right and wrong.
in terms of trading robotics, one of the great advantages of robotic trading systems is that they are not subject to the emotions and pressures that afflict human traders and can lead to fear, greed, overconfidence and the classic “revenge trading” reaction to a sudden loss.
Speaking in MIT Technology Review, Hod Lipson, an engineering professor at Columbia, who heads the Creative Machines Lab, pointed out that people used to think that technology would destroy some jobs but would create better ones to put in their place. Lipson says the evidence now is that yes technology is destroying jobs and yes it is creating better jobs as well. But unfortunately, it’s also creating fewer jobs. And this may cause all sorts of problems in the future as people find they need skills they don’t currently have, in order to get a job.
Technology, particularly robotics, is coming towards us like a large wave. It’s up to us whether we grab our surfboards and get on top of it, or just watch it fearfully until it breaks over us.
When it comes to trading, we do at least have a choice. Why not start by dabbling a toe in the water – trying some automated trading in part of your portfolio and seeing how you get on?
You may find that you start to see yourself much more as an asset manager and much less as the hapless person flipping the burgers at the beachside bar.