Pros and Cons of Automated Trading
Automated trading, or algorithmic trading, surely is a great tool for inexperienced traders. Executing trades with an automated system has many benefits, however, that does not mean there are no risks involved. Here are the major pros and cons of automated trading:Pros:
- Emotion control - The emotional component is eliminated, with automated trading you don’t need to make the tough emotional calls by yourself.
- Time Saving - Not having to study how to trade the markets saves you a great deal of time and enables you use your free time for other important causes.
- Instant testing and optimization – You no longer need to sit in front of the computer for hours and attempt to monitor and analyze all market movements, automated strategies are able to monitor several markets and assets simultaneously. There are growing numbers of trading platforms that offer automated trading. Metatrader4 is probably the most popular one of them all, since it offers powerful functionality for testing trading strategies, as well as providing full historical data.
- Lightning speed decision processing ability - Automated strategies react immediately to the market situation, since it is factored in their program, while A trader can be too slow to react when deciding to open the order or not. Automated strategies enter the market instantly, the second the necessary signal arrives.
- Round-the-clock market-monitoring – The automated strategy providers are monitoring the markets 24 hours a day for you, something that’s hard to accomplish when you have a job or any kind of obligations.
- Beginners luck – Automated trading makes life easier especially for inexperienced traders, since strategy providers are doing all the hard work for you.
New traders can observe the actions of a strategy provider and learn how to read the signals in the markets.
- Broker-independent - Metatrader4 platform can be used with a variety of Forex brokers. This means that an automated trading strategy can be copied without any specific broker logic required, and so, traders can easily copy any strategy regardless of which broker the strategy provider uses.
- Lack of Emotions – Fully automated strategies have no intuition and can’t make discretionary decisions.
- No room for error- System and Network errors can affect your trades and lead to losses. It can be risky to rely solely on fully automated strategies.
- Keeping up with market changes – You need to make sure your automated strategy is constantly up to date based on economic and political news.
- Costly to buy and hard to develop - Obtaining a good automated trading system is not an easy task. You can either put the time into developing one, hoping you’ll get it right, or buy one, paying a substantial amount of money and hoping you got a good one. In both cases, this will require much research, testing and luck.
Now that you know the pros and cons of automated trading, the next step is to try our free 30-Day Demo.