First, autotrading is a great development for the trading community, both for investors as well as traders. It gets rid of all the fluff and ambiguous analysis that float around the internet, that whole crazy circus feeding the modern gold-rush. Instead, it cuts right to the point what it is all about: what's the actual and verified trading result measured in euro or dollar?
If you have read my posting about the market guru's and their predictions, then you'll know that most 'traditional' market analysis and trading advice has absolutely no trading value at all. Also there is no way of determining which market commentator/analyst is consistently and objectively better than the other.
In the past, my blog started out with measuring performance of the Greed and Fear indicator by counting index points that were predicted correctly. Here's how that worked. And although that was way more concrete than 99% of other internet analysts, it still wasn't perfect. Now there's autotrading. Well, actually, it's been around for a while, but it became time for me to take that next step and join several autotrading platforms.
With autotrading, a third party, the autotrading platform, keeps track of all the trading results a trader makes. Usually the trades have to be entered on that platform by the trader because that would be the only way to keep good and honest track of all trading. No rear-view mirror predictions, but actual trades that were put up right when it happened.
As time goes by, the trader builds up a track record with actual verified trading results. Now potential investors can have a good impression of how a particular trader is performing, the autotrading platform is the trusted third party. It will provide all kinds of statistics about the particular trading result as well. The net result is one thing, but maximum draw down another very important one.
But it gets better! If an investor wants to 'follow' a certain trader, this is easy. The platform has to connect the broker account of the investor to the trader. From that point on, every trade the trader makes, will be executed in the accounts of all connected investors instantly.
The investor doesn't have to sit behind the computer, doesn't have to wait for an email or text message saying what to do or enter difficult orders. This way, investors get the exact same trading result as the trader they subscribed to. This is autotrading.
All along the investor keeps his own broker account, has complete control but will see trades coming in from the trader (or traders) he has subscribed to. Profit and losses have the same effect as if the trades were his own.
As long as the investor is connected to the trader, he has to pay a certain fee to the trader. This can be a fixed amount or performance fee, or a combination of the two. It is up to the trader what fee to ask for his service. The autotrading platform takes care of these payments as well.
So in short: investors subscribe to a trader and can then relax on the beach. Traders only trade. The autotrading platform deals with all the administration and payments.
Coming up soon: how to be an investor with the Greed and Fear portfolio