Pros And Cons

Of Automated Trading

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Automated trading has actually been around

since the early 1980’s. However, most retail

traders learned about automated trading only

in the past decade. This is due to the invention

of Meta Trader 4 which has simplified

automated trading.

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There is an ongoing debate as to the impact

of automated trading in the financial world.

Many believe it has both advantages and

disadvantages.

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Pros:

• Automated trading strategies are readily

available online. These can be obtained for

free from fellow traders, purchased or

through a subscription basis. This means

less knowledge of the financial market

required to trade, compared to manual

trading.

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• Automated trading can also help improve

trading consistency. No distractions will

stop the program from trading (unless it’s a

power outage or server failure).

• Emotional trading is eliminated because the

program trades on the behalf of traders.

Letting emotion take control of trading is

one of the top reasons why traders fail.

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• It is also a given that having a machine

trade on our behalf will consume less of

your time spent analysing the market.

• Nowadays, these programs are being run on

a virtual server, removing the need to have

the computer at home / office running 24

hours a day and eliminating power outage

or internet connection issues.

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Cons:

• Traders have lack of control once the program has been switched on. This is due to the systematic nature of the strategies pre-coded, once run most automated trading cannot be disrupted.

• Computer programs do not take into account breaking news or sudden changes in the market, therefore it is unable to assess the current market condition.

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• It also does not take into account the

fundamentals of the financial world.

• A single strategy cannot work flawlessly

across different market conditions. A

strategy designed for a trending market will

find little success when the market enters a

range.

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Even though automated trading has a number

of pros and cons, it is all about finding the

right balance. You can always run some tests

with limited capital initially to see how the

world of automated trading can work for you.

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Visit our Invast Blog today for more insights

on using automated trading to your

advantage.

Disclaimer:

Please note that any advice given is general in nature past performance is not

indicative of future performance.