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The pros and cons of automated trading

 

The last few years, automated trading has become a kind of a trendy topic in the trading world. Some consider it as evil and try to make it responsible for all the anomalies appearing on the markets, others try to understand it in order to make profits. The aim of this article is to make you move to the right side so that you can improve your trading.

The emergence of automated trading.

Nowadays; it's hard to live without a personal computer and a broadband connection. Thanks to the new perspectives opened by the IT development, trading which used to be an activity reserved to some privileged has now become accessible to nearly everyone. But the IT development has not only facilitated the access to the trading, it also opens a new way of trading to the independant trader, a way which was before reserved to banks and "hedge funds" : the automated trading's one.

Everything it requires can today be found on the Internet : a broker, a platform ( such as Metatrader, NinjaTrader, MutiCharts, etc ) and a bit of ingenuity and work will make you able to create a robot trading for you. However; everything is not that easy. Do not magine creating or buying a money maker machine in a few clicks. The aim of my article is not to make the appraisal of automated trading but rather to present you the advantages and disadvantges it offers so that you can re think and and improve your trading approach.

The pros of automated trading :

- frst of all; automated trading is able to solve one of the biggest trader's issue : his psychologic weakness. A robot will respect without qualms the rules of your trading strategie. For example; thanks to it, no more moving stop loss or positions opened impulsively.

- A trading robot works all day long without having to rest. Even if it does not sleep at night; it will still be fresh on he morning... It will thus never miss a trade opportunity 24/7 and wont make mistakes due to tiredness.

- A trading robot thinks well and fast... It can realize millions of operations per second, what leaves human beings far behind... even before the cocktail hour. It makes you thus able to act faster than everyone else, and to analyse at the same time a huge quantity of parameters on different markets.

- Finally, a robot does not need you in order to work. You can go to work, have a rest.. ( I let your imagination complete this list ), while it will respect your strategie without complaining, going on strike or ask for a salary raise...

The cons of automated trading

- A trading robot only has the intelligence you gave to him. This means that it has absolutely no natural adaptation capacity. If the maket evolves and your strategie becomes loss making, it will be your turn to work to improve your system.

- Automated trading is therefore, an activity more focused on research and development than on trading itself. This will suit to some but not to everyone.

- Your strategie has to include logical rules, because a computer only understands logic...

- Finally, the modelisation of an automated system requires the learning of a programming language or to contract out this activity to a professional.

Half-automated trading.

To conclude, automated and systematic trading present a lot of advantages but won't suit to everyone. However, if your preference still goes to manual and discretionary trading, don't forget that IT can greatly facilitate your life by executing numerous repetitive tasks. Half automated trading can thus probably become a solution.

 
 
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