Set and Forget Trading: less effort … better selection

If you’re busy, and find most trading methods take up too much time … the set and forget system is the holy grail. But many professional traders can be a bit sniffy about set and forget trading. It threatens their existence.

Is it really possible to jump into a trade … tell it where you want to go … and expect to arrive unscathed?

The driverless trade

I keep being told that driverless cars will soon be common on our roads … but I struggle with the idea of letting go of the steering wheel. Six months ago, my dad, who’ll be 80 this year, bought a car with a self-parking system – but he hasn’t once trusted it to park itself.

And many traders have the same feeling.

But a driverless car will probably have sharper reflexes that I do … it won’t be distracted because it thinks it may have missed the turn off … or because the kids are fighting on the back seat …

So, are set and forget trades – like driverless cars – the answer to our busy lives, and our very human failings …?

Or will we always be able to improve on our trades by taking matters into our own hands?

Here I want to show you why I believe that set and forget trading should be at the heart of all great trading methods …

What is ‘set and forget’ trading?

Set and forget trading, is just a rules-based system, with a bit of hi-tech automation thrown in.

The beauty of modern trading platforms is that they’ll do a lot of the hard work for us. Whether it’s as simple as set an auto stop and target … or more complex programing on an MT4 platform – there’s a lot to be said for handing over the boring graft to a computer.

So, let’s say that our set and forget trading system tells us to place our trade at 9am … to put x for a profit target … y for a stop level … and then we can forget about it. There may be a fixed time that you need to come back and make an adjustment, but until that point – you can get on with your day, knowing that your risk is under control, and any profits will be automatically collected for you.

Or, at the more complex end of the spectrum, your set and forget trading might be an MT4 program, actively managing trades according to the rules set up within that program.

And that’s the first crucial thing about set and forget trading … rules …

1. Trading needs rules

Trading without rules is just gambling – throwing some cash at the market, and hoping you’ll get lucky.

All successful traders rely on rules-based, regimented trading systems. This is true of home traders following a list of rules they’ve written down themselves … to professional investment strategies that use complex algorithms … and everything in between.

These rules stop us from following our hunches, or just crossing our fingers and hoping that luck will be on our side.

Instead, they rely on research, testing, and retesting – they look for signals that satisfy exacting technical (or fundamental) conditions, filtering out all the weaker signals. This makes for highly selective trading. And, generally, the more selective we are with our trades, the more profitable we are.

Even traders who do rely on judgment calls on their individual trades, will still have a set of rules that must be fulfilled before they’ll even consider a trade.

A set and forget system can release us from having to second guess what the market will do next – we’re not left dithering with our fingers over the ‘sell’ button … instead the rules are followed automatically, without input from us, based on sound data. This is a great way to instill trading discipline.

2. Decisions made in the heat of the moment are often poor ones

Research shows that even the most experienced traders make very poor judgment calls. Human beings are naturally dreadful at balancing risk and reward successfully – we’re always sabotaging ourselves.

Traders who manage their positions as they play out have a tendency to exit winning positions too early, and to hold onto losses for too long.

By contrast, the rules-based system will cut losses, and take profits … regardless of the feelings of fear and greed we might be wrestling with! Do you really believe that you will make better trading decisions than those which are based on cold hard quantitative research?

3. You want a life

If you have a job … a family … a busy schedule … or you just don’t like staring at screens for hours on end … then you’re going to need a level of automation in your trading.

Managing trades manually (especially on shorter timeframes) is hugely time consuming … watching and waiting for signals to appear … adjusting stops as the market moves … looking for technical signals to exit on …. This is a full-time job.

So, if a set-and-forget trading strategy is going to be more profitable … less stressful … AND take less time … what’s not to love?!

The curse of the wishy-washy system

If someone is showing me a trading method, telling me that I’ll be able to profit from it myself … one of the most frustrating things is all the discretionary decisions they make …

By this, I mean the times they tell me “Well, I wouldn’t have taken that losing trade anyway, because of x” (When the scenario ‘x’ was never mentioned in their rules).

Or, if they tell me that “I got out of this trade early at profit, because I knew that y and z” (How are the rest of us meant to know that?!)

It’s the reason that our ‘trading gurus’ are often showing £thousands in profit at the end of the month … while their students are scratching their heads, wondering what’s gone wrong.

It’s one of my biggest bug-bears with trading systems, and why I’ll always insist on testing systems in a fool-proof life environment before I’ll believe it can work.

Of course, there’s nothing wrong with using your experience to make trading decisions, and adapt your trades as the market conditions change … but this needs to happen on a solid foundation of trading rules.

So what’s the point of the human trader?

The builders of self-driving cars will tell you that humans are terrible drivers. We drink, we doze off, we text. Road crashes killed 1.24 million people worldwide in 2010, and more than 90 per cent of all crashes are blamed on human error.

So, if humans are bad at being in the driving seat for cars AND for trades … what are we there to do? Are we redundant?

Yes, your set and forget trading strategy should be able to take you – financially – where you want to go. But I don’t recommend just snoozing on the back seat. There are always plenty of chores for the trader …testing, tracking, analyzing results and managing risk. These are the areas traders should be spending their time on … rather than fretting over whether now is the perfect moment to close a trade … or maybe hold on for the next candle … or the next …

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The surprising truth about set and forget trading Forget everything I told you