As a senior market analyst for MTI, Aaron Hunziker is a strong proponent of automated trading systems and their ability to help users manage their trades better.
Hunziker brings more than 20 years of experience across all sectors of the financial services industry. He has also delivered investor education presentations at over 2,000 live events attended by hundreds of thousands of people worldwide.
Hunziker shared his insights on how automated trading could help you reach your money goals faster.
What are some of the advantages offered by automated trading strategies?
Hunziker: The things that systems can do now are changing the way that the average investor can trade because of the technology that’s available at your fingertips, my fingertips, and on our phones. It’s the kind of tech that money managers on Wall Street were using 20 years ago.
So now we have the power of technology through systems, where we can set up trades based on algorithms and scripts and can have tools running these opportunities for us. And those systems, in many circumstances, are better traders than the average person because the biggest problem they face is managing the emotional side of trading.
Emotions are the thing that traders struggle with the most and that’s typically the longest learning curve. It’s not the techniques, the buying, the selling, the entries or the exits. Traders struggle with the mentality of understanding that you’re going to lose sometimes. You’re going to go through periods of losing.
But once you understand that there’s a formula behind the strategy, that’s when the real opportunity opens up. It’s part of the learning process, which is the tipping point that traders have to get over.
How do automated systems help people minimize the emotional side of trading?
Hunziker: I think that the emotional state of trading is a huge part of what we cover when our students come on board. They go through that mentorship with Jared Martinez, The FXChief, and it’s amazing. Chief is so good at mentoring students because he’s been doing it for so long. He helps people through understanding the peaks and valleys of trading and not letting yourself get too high or too low emotionally.
One of the things that technology does is it pulls that human component of emotion out of the mix and it becomes about trading on logic instead. Now, if the logic’s flawed or if it’s not the right strategy for the right market, then you will run into problems.
But when you have the right strategy in the right market along with top technology, that’s the great opportunity for traders. And we see that with many of MTI’s trading systems in the way that they’re consistently producing right now.
Let’s say that I’m comfortable taking more risks for the chance at greater returns. How should I invest $5,000 right now?
Hunziker: I don’t think that the actual asset classes that you’re trading become any different at that point. What becomes the question then is diversification, because you have to decide, “Do I put $3,000 in one trade and $2,000 in another? I’m in two trades, so statistically I might get 50/50 odds of success right there. Or do I roll that money around five different trades at $1,000 a piece?”
To me, it always gets back to understanding proper risk and equity management, regardless of whether that’s with trading $5,000, $50,000 or $100,000. Equity management is the most important part of successful trading.
So, you can possibly make more money with a $5,000 account than you do with a $20,000 account if you put it in a higher risk-reward ratio opportunity. But if you’ve got a $20,000 account, then you can diversify it a little bit more. Having a bigger account gives you more leverage, where you won’t “blow your account up” (as they call it in the industry) as quickly as possible.
But If you’re saying, “I’ve got $20,000 to trade. I just want to make the best return possible right now.” Well, then you’re probably going to look at trading some unique cryptocurrencies or exotic pairs in the Forex market, or the fiat currency market. You could also consider getting into more sophisticated short-term options strategies that offer the biggest potential return with a quicker turnaround.
One of MTI’s foundational principles is that if you’re only looking for the short-term opportunity, then eventually you’ll run into issues and lose a big trade. And at that point, you have to decide, “Do I keep going bigger and bigger on my trades? So when do I go back to diversifying and take a smaller piece of my portfolio to speculate more? Do I try to make trades with a higher-probability percentage that have a better likelihood of winning, but maybe not a higher percentage of returns?”
It’s that diversification aspect that’s just so important for traders. But if you’re gambling and have $50,000 to do whatever you want, then I’d be watching the crypto markets for opportunities because they’re very predictable on some trends. I’d also be looking at exotic pairs in the currency market and the fiat market, or maybe doing some shorter-term options trading.
For information on registering for MTI’s investment education webinars, visit https://learn.markettraders.com/pages/how-to-register-for-student-webinars.