The “dream machine” is something that every trader looks for or looked for at least once in life, either he admits it or not. But what is the “dream machine” ? The reply to this question is very important, because to look for the “dream machine” you should know first what is that and secondly if it exists. We could even arrive to the conclusion that the “dream machine” does not exists and so we need to watch out if we only think to come close to it.

The “dream machine” is an algorithm that makes a lot of money without any risk. Usually if you think to the “dream machine” it is a tool that makes some dozen if not hundred trades per day with a very low drawdown and a daily profit which is a sure thing. If the drawdown happens it takes place during the day and since the algorithm makes a lot of trades it will be very easy to retrieve breakeven and than reap some profits.

Usually in books you see the function that associate the length of drawdown and the rate of return to the number of trades: it is self-evident that if you make hundred of trades per day it is the same than making hundred of trades during a whole life so that what you see in one day an average trade will see in a full career. The “dream machine” is all that: it makes many intraday trades, it has drawdown only during the day, every day will end up in profits. Do you like the “dream machine” ? Is this a “high frequency trading system” ? We could know. Nobody knows what is a “high frequency trading system”, everybody knows what is a “dream machine”.

Now we defined what is a “dream machine” let’s talk about the possibility that it really exists. The first thought is if we saw a “dream machine” in action sometimes during the life. Yes, I saw it. For example now some fellow traders made last month 300.000 in profits scalping financial markets with an Excel program that places automatically bid and offers. Trading capital was 100.000. Not bad, but it happens only when something bad takes place on the markets, the Greece ‘s failure or something worse. Otherwise the dream machine nets 200 – 300 euro per day, nuggets in comparison to his top days.

Around 13 years ago I saw another “dream machine” on the Italian derivative market buying and selling the Italian stock index futures on a 50 ticks bar charts. But it went bust after some months, notwithstanding the traders that devised it ended up with some hundred thousands of today’s euro.

Today there are many software house selling products that allows the trader to build up a system with ordinary indicators like RSI or Stochastic thought a fuzzy logic and genetic optimization process. Usually these softwares are black box so that you need really to trust in God before using them. But in my experience an Italian trader made good profits on Dax with some pieces of codes that came from this kind of software. So there is some experience that tells us that this could be an alternative way to make some money on the markets.

In conclusion we can state that some form of dream machine exist today or at least they existed in the past. Many rumors are around that there are nowadays “high frequency programs” making fortunes every day but seldom it happens you can see them in action. And if I could say my honest opinion about this topic is that I would not absolutely lose faith in the “dream machine” realm. It is something every trader has and it is almost a religious belief that make you feeling good.  So please do not shoot over “dream machine”: leave to me the hope to build somedays a “dream machine” that will make me rich without pain and any drawdown pouring money in my wallet like the tap pours the water into the bottle.

What would be our life as a traders without the hope of eventually find a “dream machine” ?

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About Author

Emilio Tomasini is Chief Editor of the Italian edition of TRADERS’ MAGAZINE (www.traders-mag.it), the leading monthly publication in Europe for trading and investment, and since 1999 he organizes the TRADERS’ CUP the most important real money European trading competition (www.traders-cup.it). His personal weekly free newsletter L’Indipendente di Borsa (www.indipendentediborsa.it) is one of the most reputable Italian financial media and counts more than 100.000 readers. His website in English is www.emiliotomasini.com

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