Black box investing also called black box trading is nothing more than a trading method that no one else knows and has been pre-programmed using logic to generate both buy and sell signals automatically for you.
Are black box trading systems (robots) going to fizzle out or will they take over the financial market place?
The short answer is Yes, they are here to stay and will become a larger and larger part of the financial markets. But I do not think it is something to panic about just yet…
While high frequency trading “HFT” systems are dominating the number of transactions already, I feel it will be another 4-6 years before individuals really catch on to black box trading. Remember 95% of traders lose money, and it is these people who are going to try to build the automated system to remove their lack of skill and discipline in the trading arena.
There is a handful of sites now making it very easy to build your own black box trading system through drag and drop technology that requires zero programming skills. The problem for these new under educated quantitative black box trading individuals will be the lack of trading, money management and algorithmic trading systems background to know if they even have a solid black box investing system.
Even when these individual investors have a system that proves to be a winner through backtesting, they are going to be in for a big surprise when they go live and the results are completely different.
Understanding how to build a system that can be accurately backtested requires some experience. Not all black box trading systems cannot be accurately backtested depending on the data point and time frame used.
The benefits of “black box trading” are that electronic platforms are not subject to human error. In addition, they can do millions of calculations per minute that us as humans are just not capable of.
Besides executing every entry and exit opportunity the market has to offer automatically with black box trading, not missing or skipping trades because of human error, human emotion or the lack of available time proves automated trading systems to be more consistent with returns which is a huge benefit.
At AlgoTrades we use our black box trading system to generate trades, manage positions and to generate profits.
The “black box trading” system we have running is just our S&P 500 index trading strategy that uses pre-programmed logic to generate automatic buy and sell orders.
If you are looking for an all in one black box trading or black box investing system that can make you money in up, down and sideways market conditions, then you have come the right place.