The Advantages and Disadvantages of Automated Trading Systems

The Automatic Investment Software:

This is an algorithmic software which is developed exclusively to track the trends, past and present, in the trading markets and put forth data to reveal the best areas and times to invest in the current economic scenario, thereby earning profits for all its users.

The software system is linked to a direct access broker or the developer who makes the choices from a list of commonly available technical indicators and establish a set of guidelines based on which the automatic trading takes place.

An automated investing bot seems to be quite the fanciful idea these days in the forex trading circles these days. With so much hype and quite a few new automated trading software systems being developed, the prominent one being the 1G Profit system, it is worth a look at the main pros and cons of such systems.

 

The Advantages of Automated Trading Systems:

  • A fully automated investment system translates into trading discipline, especially in rapidly swinging and unpredictable economic scenarios. Sometimes when emotions are involved in such volatile market situations trading strategies go for a toss. During such times, an automatic system helps to stick to a trading plan as per the data predictions.
  • It helps to bring consistency to the investment plan and structure of individual investors and this in turn translates into overall trading consistency. An automated trading system helps the traders to overcome the trauma of losses and focus their sights on better investment strategies than giving-up on trading completely.
  • Since the algorithms are back-tested and a software bot is free of emotional turmoil and bias, which is inherent to human nature, it minimizes emotional conflicts and invests purely on the facts and data presented based on the past and present market trends. Thus, a decently flawless system can earn profits for its users at any given time.
  • It helps in trade diversification and helps a prospective investor to look into different trading strategies at any given time and help him to trade multiple sectors.

The Disadvantages:

  • What if the algorithm fails? What if the software system experiences sudden glitches and causes unexpected heavy losses for its users? It’s an automatic system but developed by humans who are prone to errors afterall.
  • Even an automatic system requires constant monitoring to avoid or reduce the occurrence of trading anomalies which could result in duplicate or deviant orders.
  • Back testing may look great on paper. The data and optimization arrived at could make good study analysis. But in a ‘real’ market it could backfire, because sometimes historical, empirical data may not always work and human intuition could do wonders. This is Forex trading! Anything can happen and that’s the reality.

The automated trading systems are new and in their initial days. They are not yet fully fool-proof to be substituted for carefully planned and executed trading, because it involves the hard-earned finances of several common investors. But choosing a legit automated system which seems to have good trader reviews and testimonials and experimenting it along with manual trading may be a good idea.