In response to this, there are many developers who have created automated trading systems. These generally use complex algorithms to scan the markets and look for an opportunity. When they locate one they will automatically invest your funds and hopefully generate you a profit.
But not even the automated systems can get it right every time; there are simply too many variables. Let us take a quick glimpse of the problems encountered while using and designing an automated system and render it good solutions to overcome this.
One of the main issues is with the data pitfall that can immensely transform a decently built system into a bad one or vice versa. So concisely, one should analyse the various considerations relating to this field like
- The data reliability
- One should really focus on all the realistic features regarding the accuracy of the data before the systems are being iterated. For this, thinking out of the normal trading conditions is always necessary.
- This can better be explained with an example for say, the shares of a business firm are being traded at twelve dollars but on a certain condition, the trade is continuously printed at fifteen dollars just before this process pick up from the previous levels. This problem is mostly encountered due to the bad ticks. If the stock being traded upon is unstable to predict on then, it is possible to regard it as a bad trade. Thus, one cannot truly depend on the printed data being shown on the system screen. In contrast to this, these poor ticks are so good in quality as they are already filtered by the data providers.
- Testing procedures to be conducted in future is another point of concern. One should need to perform continuous back testing with the changing contractual periods. Bitcoin Code employs this.
- The biasing condition of survivorship
- There can be situations like the historical data records of the stock prices have been lost or just disappeared by some means. This can be due to delisting, merging or related situations. If this happens, then it can be said that the data suffer from survivorship bias. Moreover, this is a dangerous situation to be dealt as they mainly occur in the schemes that attempt to buy low and sell high and also for the trades that need to be held for a long time say for weeks or even months.
- Precisely deciding the filtering factors like price or range can help to overcome this bias condition.
- The snooping of data
- While developing a trading system, one should take positions with regard to constant optimization by clearly adjusting the parameters to get the best possible outcome. This process is often referred as the fitting along the curve.
- Further, there is a need for samples in proportion to the number of parameters used for optimization. This requirement is noted as the accessible degree of freedom. Indeed, they can relate to the degree of robustness of the developed system.
There are also other variables that relate to these automated trading ones. Automated trading systems can offer an additional option for trading and can even be used if you do not have the time or the experience to trade yourself. BitCoin Code is one of these automated options; the question is whether you should be using them or not.