Automated Trading Pros and Cons
Automated trading, or algorithmic trading, is a great tool for all traders. Executing trades with an automated system has many benefits, however, that does not mean there are no risks involved.
So why should you use Automated Trading? Here are the major pros and cons
Pros:
1. Emotional Control - When trading automatically, the emotional factor is eliminated, since you don’t need to make the tough emotional calls by yourself.
2. Time Saving - Not having to study how to trade the markets saves you a great deal of time, and enables you to use your free time for other important causes.
3. Instant testing and optimization – Automated strategies are able to monitor several markets and assets simultaneously. You no longer need to sit in front of the computer for hours and attempt to monitor and analyze all market movements.
4. Lightning speed decision processing ability - Automated strategies enter the market instantly, the second the necessary signal arrives. They react immediately to market changes, while a trader can be too slow to react when it comes to deciding whether or not to open the order.
5. Round-the-clock market-monitoring – The strategy providers are monitoring the markets 24 hours a day for you, something that’s hard to accomplish when you have a job or other obligations.
6. Beginners luck – Automated trading makes life easier, especially for inexperienced traders, since the strategy providers do 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.
7. Broker-independent - Automated trading strategies 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.
Cons:
1. Lack of Emotions – Fully automated strategies have no intuition and can’t make discretionary decisions.
2. 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.
3. Keeping up with market changes – You need to make sure your automated strategy is constantly up to date on economic and political news.
4. Costly to buy and hard to develop - Finding 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.