Pros and Cons of Automated Trading

It is certainly very attractive to develop a profitable trading strategy and then to code it into an EA that would open and close the trades based on some certain technical indicators. Not only this would assure there are no faults based on trader’s psychology or inconsistency of your decisions, but it would also supply you with tons of free time that you could use for benefiting from the results of your EA. Sounds quite good, doesn’t it? Well, we also have to say that not so many traders are actually able to execute such an approach. In this article we are not going to tell you wether you how to automate your trading, but we will rather examine the reasons for doing and not doing it.Advantages of Automated Strategy

In simple words, the main advantage of having your trading strategy done by the robot is that you don’t really have to spend any time sitting next to the computer. Well, to be perfectly honest – almost any time. Even if you have your strategy automated, it still requires you to make some minor fixes every now and then to perfection it or simply to adapt it for the current market behaviour. Hence, the main advantage of automated trading is to freedom.

In addition to this, once you have a script that is capable of bringing profit, you can scale it out a lot. Meaning that you can now benefit not only from the trading activities done with your capital, but from the capital of other people too. There are a few managed account systems that specialise in automated trading and once you have a money making script – you will be able to get some 10-25% return on the profits that are generated via your trading robot.

These are two main advantages. From the one side, you can get a potentially very high income, from the other side, you are provided with a lot of time to enjoy the money you’ve earned.Weak Points of Automated Trading

There are of course a few disadvantages that are not necessarily the result of having your strategy automated, but rather potential issues that can be experienced by regular traders on the way of building a robot out of their profitable strategy.

First of all, not every traders is capable of crafting robots. To do this, a trader either needs to learn how to code or trust that someone else would actually prepare a requested robot based on the trader’s description. Even though the cost of development is rather minor, a potential cost of a lose due to the incorrectly coded robot can be rather high. In addition to this, even if someone prepares a great robot based on your requirements, it would be quite hard to tune it up without any coding knowledge. Hence, if you are looking into automated trading – begin with learning some basic coding skills.

News releases can sometimes be deadly for the trading robots, as macroeconomic data is capable of transforming the market within a matter of seconds. It is often hard to predict how a robot is going to behave, so sometimes it may be best to actually switch it off on the days of the major news releases.

Another weak point is that not every broker allows expert advisors…or not every broker supplies a proper trading environment for an EA. This is why you should make sure that your robot can work with the same broker you were using for your manual trading. If you broker doesn’t allow EAs or cannot provide a proper infrastructure, it is recommended to take a look at the list of the ECN Brokers and find the one that matches your needs. Sometimes ECN brokers can get expensive, but their speed of execution is superior.