Some say that you can very well computerize the stock trading system based upon stock market technical analysis. Do you think this is possible? Can you program a computer well enough to predict how the market will behave 5, 10 or 25 years from now? I very much doubt it but here are some general opinions on this subject:
1. Simulated bad scenarios – it is true that computers can help a great deal in the field of the stock market. It can create simulated situations such as pre-depression, inflation, and other mock such situations which require extra care with the investments. Computers can help you face these realities and test your judgment. It would be clear to you whether you are able to make profit in tough conditions or not.
2. Simulated winning scenarios – are you able to identify which market is good for you and which long-term investments will work optimally? Computers can indeed simulate short-term and long-term scenarios that would test your various strategies and analysis.
3. Can you interpret the analysis correctly – a good investment strategy is very much dependent upon the accuracy of your interpretation of the various market factors in play at any given time. To have a successful campaign, you need to know how to cross-reference the present-day market analysis with the stock market forecast and the most recent news of the economic conditions. Computers can simulate various such factors that would test and hone your skill at the same time.
4. Teach to analyze the market factors and financial behavior of various companies – how do you analyze these factors correctly. While you could be the best in theory, in reality you may flounder. Computerized simulation can once again teach you what to watch out for and how to identify the key factors that influence the returns on an investment.
5. Computers will convince you that stock market is definitely not the same as gambling – there are many people who think that day trading is something anyone can do with minimum or no training. This is a myth; a very dangerous myth for believing in this you can walk to your financial destruction. The truth is that investing in stock market whether short-term or long-term requires patience, long training and specific expertise. This is definitely not something that anyone can do with just will power and a little luck.
That brings us back to our question – can computers do stock investments for you. The answer is an emphatic ‘no’. Computers base themselves on pre-programmed data and there is nothing absolutely than pre-program the way the economy will swing even if you feed all the available factors into the computer. There are far too many variants in the possible scenarios for you to be able to choose one that suits you best.
At the same time, computers are not altogether useless. Carefully engineered programs can be extremely effective in simulating real life scenarios and teaching you lessons for free (without the risk of losing money); and this is some remarkable help indeed.