In many cases, online trading can become a full-time profession, with near-constant monitoring being required to avoid any mishaps. However, not everyone has the ability or the patience to sit and watch for hours on end and many traders have other important tasks or even other stocks and markets to keep an eye on. This is why many traders make use of automated trading systems to help them manage their buying and selling when they’re otherwise unable to manually do so.
Here we discuss the pros and cons of using automated trading platforms as well as the types available to you.
How Automated Trading Works
These systems which are sometimes referred to as mechanical trading or algorithmic trading present traders with the means of setting up rules which will then be carried out via a computer system. This is often in the form of buying a particular stock when it reaches a certain price, and then selling it if it hits another milestone. These systems are generally linked to a broker and trading platform that will offer their own automated trading options.
The popularity of automated trading has led to the creation of plenty of templates and automated trading options on these systems, reducing the complexity by allowing traders to choose from commonly used rules, although in some cases, traders will manually create their own indicators alongside the system programmers for more specific rules.
The Pros
There are many advantages to using automated trading systems. First of all, an automated system, coupled with things like the dedicated Forex VPS-server service from RoboMarkets can allow traders to continue trading even when they’re unable to check their trading platform due to technical difficulties or when traveling. It also helps to remove the emotional aspect of trading which arises all too often when manually trading.
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Fear and greed are huge motivators behind many bad choices in trading and allowing an automated system to manage your trades for you remove that issue. An automated system also removes human error in trading. This could either be from entering the wrong entries or even being unable to act quickly enough on a trade.
Similarly, the sheer speed of an automated trading platform allows you to manage multiple accounts quickly and easily without the risk of overlooking critical issues. You will then monitor these automated systems just to avoid any technical issues with orders, which you can then rectify quickly, getting the system back on track.
The Cons
When it comes to the disadvantages of automated trading systems, mechanical failure tends to be the main issue.
While it’s not overly common, there are cases where errors have arisen, either technical or algorithmic, and caused problems with an order. For example, if you’re running your automated system off of a standalone PC and you lose connection to the internet, you could miss orders. This is another reason why a VPS server can be beneficial as even if you do lose connection, the trades will happen without you. Due to this technical drawback, it is then essential that you keep an eye on your automated systems anyway, which means it’s not an entirely autonomous system. It may be automatic, but you need to be there to rectify any errors that appear.
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