Those depending on automated systems quickly learned how robots could not adapt to new market conditions. The worst part? It all should have been expected, as the markets were showing patterns that no one had ever seen before. The industry had changed forever.
But what else makes Black Box or Robot Trading systems unreliable?
Most creators of these systems have minimal live testing and usually rely upon backtesting. In other words, the systems are based on old data and past results to entice their new contributors. The major problem with this? It’s not really hard to make tweaks to a back-tested system appear proﬁtable. What does this mean? Sadly, it means these systems are created using old data and past results. While this makes them look more attractive to potential clients, it’s very detrimental in the long run.
It’s easy to make a system based on old data look proﬁtable. A few tweaks can make a world of diﬀerence. However, the 2008 market changes we just discussed forced automated systems to begin adapting at an exponential rate. So how do automated systems keep up with that? Honestly, we’ve yet to ﬁnd one of these systems capable of changing at the necessary rate.
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