The growth of the Internet has seen traders look more at the use of futures trading software as a way to increase their profit potential. Today, many vendors are selling futures trading software packages that make 50% annualised gains a reality. While there are many good systems, there are also many that dont perform. This article is all about picking the ones that do and making big profits. So what should you look for when choosing a futures software package to trade? Here are some tips to help you choose correctly. 1 - Dont buy a black box system. A black box system does not reveal the logic the system uses to trade the markets and this presents two concerns: Firstly, futures and commodity trading is all about discipline and its a fact you will have more confidence in a system if understand the logic it is based upon. If you don not, you will not have the confidence to follow it through inevitable periods of losses. Secondly, many unscrupulous vendors simply create a track record that makes profit by tweaking the rules to fit the data. This is known as curve fitting and is one of the main reasons a huge majority of futures trading software fails to make profits. 2. Curve fitting Many traders buy systems that are curve fitted to the data and they see different rules to trade individual commodities. If a system uses different rules to trade individual contracts its curve fitted and likely to fail. Curve fitting is simply fitting the rules of the system to the data to make a profit. When the system enters the real world and trades you cant curve fit in hindsight! The result is inevitable, losses. A clue to a curve fitted system is one that has lots of different variables and unique rules to trade individual commodity contracts. If a system is based on sound logic then it should work on any commodity that, trends with the same rules and parameters. Most of these systems have hypothetical track records with low drawdowns and should be avoided 3. The best systems are simple and easy to understand The best systems tend to be simple to understand and only contain a few rules or parameters. Many traders make the mistake of thinking you need a complicated system to trade successfully, but this is totally incorrect. 4. Hypothetical v real time track records Its always best to look for real time performance; this can be in the form of audited figures or figures from a rating agency such as Futures Truth that trades systems with realistic commission and slippage in real time. If a vendor is selling futures trading software without trading it themselves or independent verification of results, then dont buy it. If they wont risk their funds why should you? 5. Commodities traded Try and look for systems that trade long term and focus on trending markets such as: Stock indices Bonds Currencies Energies These markets tend to be the best for technical trading and are likely to produce the best results. 6. Diversified or individual commodities? This is really a matter of choice. If you trade an individual commodity your reward may be higher but so to is your risk. A diversified portfolio may have less profit potential but the diversification should reduce risk. Its a matter for each trader to decide, but diversified systems tend to perform better than ones that focus on a single commodity and have less downside volatility. Final words... The above are general guidelines and will help you choose futures trading software that can help you target above average capital gains potential. Many systems are sold and many look to be good to be true and more often than not they are. Hypothetical track records with only small drawdowns are not the reality of futures and commodity trading. Use the above guidelines to choose your futures trading software then take a long term view and follow your system with discipline and you could be making the above average profits all traders desire. |
