Automated trading programs are a thing nowadays. These are automated programs that run on a computer and trade on your behalf.
Automated trading programs only require trading conditions, or programs, that the software will run. It requires you to have the knowledge of programming, apart from trading.
However, there are also some downsides. Here are the pros and cons of automated trading programs.
Pros of Automated Trading Programs
There are many good reasons why traders use automated trading programs. Here are some of them.
- Automated trading gets rid of the many of the psychological restrains of trading. As a result, the trader will be able to focus on polishing his strategy. He will be more focused on spotting the next great trading opportunity.
- Automated trading programs are faster than the human mind. When it picks up a trading signal, whether buy or sell, the program will quickly make the trade. As human beings, on the other hand, we are sometimes prone to second-guessing our decision, causing delay.
- Programs can monitor more markets. A human being, meanwhile, can only monitor a number of markets at the same time. Once you set it, it will do its programmed jobs at a fast rate on even a hundred markets.
- Programs require minimal intervention. As we have mentioned, you simply have to set the parameters needed to run the program. Once you set it, it will function on its own with very minimal human intervention.
- Another great thing about automated programs is their ability to know whether a strategy is viable or not. You can test the program against different markets to see its performance. Most of the time, this will reveal any form of weakness and strength found in the program. You can use the feedback you get to alter or improve the program to fit different markets.
Overall, the greatest appeal of automated programs is that they remove the chances of losing trades by removing the human error element.
Now, let’s see how automated trading programs can also have flaws.
- As we have mentioned, you also need to have some amount of programming knowledge if you want to use automated trading programs. And that’s not only in the beginning. You need to learn more about it each day to constantly upgrade the capabilities of your program.
- The program still needs some amount of manual intervention. It’s quite rare to find a program that’s 100% automated. You can find this a weakness of the program when it’s put into volatile market conditions.
- If you choose to buy a program instead of creating one, you won’t know what the program is really doing. When you use someone else’s program, you lose the advantage of knowing when and how the strategy or program works.
- Programs may also lead you to huge losses if the programming is faulty and you fail to properly check it. Faulty programs will continue to execute faulty trades without your intervention, so it’s still very important to learn to do the trades by yourself.