Forex Auto Trading Systems (Pros and Cons)
What is an Auto-Trading System?
An automated (or mechanical) trading system is a combination of hardware and software that follows a specific set of rules to execute trades 24 hours a day, five days a week. Once programmed, the system can automatically open and close positions using a computer, a trading platform, and an internet connection. The entry and exit rules can be based on various conditions, including price, volume, time, and volatility.
Effective use of a Forex auto-trading system requires advanced technology and a reliable Forex Broker.
Here are some key pros and cons when using a Forex auto-trading system:
(√) Auto-Trading Pros
(1) Automation (Saving Time)
As an auto-trading system trades 100% autonomously, traders can save precious time and focus on other fields of their life.
(2) Trading 24/5
An auto-trading system can trade without sleep or rest on a 24/5 basis.
(3) Speed of Execution
An auto-trading system can analyze the market considerably faster than any human trader but also to execute trades at a glance. This can be a great advantage in times of extreme volatility (i.e. times of news releases).
(4) Objectivity of Decision Making
Human traders usually suffer from stress and follow an emotional decision-making procedure. Auto-trade systems follow their programming rules in a 100% objective and repeatable manner.
(5) No Fear or Greed
Fear and greed are some of the worst enemies of every trader. Fear prevents the trader from accepting necessary risks. Greed prevents traders from closing out a bad trade or can motivate traders to maintain their positions longer than they should.
(6) Implementing Complex Strategies
An auto-trading system can implement complex and advanced strategies such as High Frequency Trading (HFT) strategies.
(x) Auto-Trading Cons
(1) Cost
A decent auto-trading-system requires the use of state-of-the-art computer technology and a Forex Virtual Private Server (VPS). They both cost.
(2) System failures
System failures may occur. Moreover, a locally running auto-trading system may lose its internet connectivity and crush. Some auto-trading systems cannot recover effectively from a system breakdown.
(3) Difficult to Control Losses
If market conditions become unfavorable, an auto-trading system can suffer a substantial number of losing trades.
Conclusions
An auto-trading system offers several significant advantages over manual trading. The primary benefit is the elimination of fear and other emotional influences, as well as the absence of physical limitations such as the need for sleep. However, auto-trading systems can be expensive and require advanced software programming to function effectively. Additionally, implementing a solid money management strategy is crucial for the success of any auto-trading system.
■ Forex Auto Trading Systems (Pros and Cons)
ForexExperts.net Blog (2018)
