An automated trading system is similar to an automated navigation system.

 

Most people think that an automated system should work in any situation and for every currency pair.

 

But actually this is not true.

 

It will react to one kind of reality and that will produce one kind of result.

 

Think of a road trip or your everyday commute.

 

Probably the time it takes is not equal each day.

 

You might get up at the same time as yesterday, but today it is raining.

 

You dress up a little differently and pick up your umbrella.

 

So you get into your car at about one minute too late.

 

Because of the rain the sight is not very good, so other people might drive slowly.

 

That causes a traffic jam on the highway and now you are really late.

 

So you try to take a different route that was suggested by your navigation system.

 

And that is probably exactly the same alternative route that is suggested to hundreds of other drivers who use the same navigation system.

 

Now the traffic jam you wanted to avoid is right in front of you, because the other people who wanted to avoid it also took the same route.

 

In this scenario doing what you thought would be the best option to avoid a delay actually caused the situation you wanted to avoid.

 

And I guess every car owner knows that there are problems that can’t be avoided all the time.

 

On some days you might have to deal with icy roads.

 

On other days some roads might be closed.

 

And your navigation system will do its best to help you to reach your destination as fast as possible, but it can’t help you to avoid accidents.

 

You are still the driver, you are the one who decides at which speed you take the next turn.

 

You decide if you listen to the advice of your navigation system or if you take the next exit on the highway.

You wouldn’t expect your navigation system to be a fortune teller.

 

It works by calculating the probabilities, but it can’t tell you if a garbage truck is blocking the side road around the next corner.

 

And a trading system is doing the same thing. 

 

It calculates the probabilities, but that doesn’t mean it can foresee the future.