Autotrading sounds like a fantastic idea for traders, as it means that it is possible to make a good profit with minimum effort. With autotrading, a system takes on the role of the trader, and based on set parameters, is able to determine when to buy or sell a chosen stock. Before you decide to go for an autotrading system, here are some pros and cons that will help guide your decision.
1. No Emotions
When you choose an automated trading system, the impact of emotions on a trade is removed. This means that the system is able to stay on course with the plan in place, even when there are sudden or unpredictable changes in the market. Human beings may panic and make rash emotional decisions, but an autotrading system does not have this weakness.
2. Quick Decision Making
Once you have put the parameters or rules in place, it is up to the system to make a decision when necessary. The system never goes off, so it is able to pick up on changes in the market with ease. Furthermore, there is no time wasted on contemplation, and decisions can be processed in a micro-second.
3. Consistent Trading
When you use an automated trading system, then consistent decisions are made. Staying according to plan is one of the hardest challenges that traders face, especially if they are looking at a range of things happening in the market around them. This makes it easier to avoid any losses.
4. Maximizes on Time
There are twenty-four hours in a day, and it is not possible for a person to be astute and able to pay attention for the full 24 hours. With autotrading, it is possible to capitalize on every minute of the day, and also to trade on multiple markets at the same time. This usage of time also gives you the freedom to do other things while your trades are going on.
1. Mechanical Failure
The same issues that plague typical systems also affect autotrading systems, one of these being mechanical failures. This can occur when there are issues with the internet, as the system is reliant on the internet for support. When the internet is not working effectively, it means that a trade will not be completed as expected.
2. Discretionary Choices Are Not Possible
When working with a system, it is normally programmed to look at situations as either black or white. There is little room for additional logic or discretion in the programming. This means that the autotrading process lacks a certain sensitivity when it comes to assessing what is happening within the market. This may cause to a rash decision to be made while trading.
Autotrading systems are typically complex in nature, and this also adds to the cost of setting them up. Excellent options have a cost implication attached, and also need the user to have some technological skill and experience to get the most out of the autotrading system.
Autotrading systems are excellent and help you improve your chances of making a profit while you are online. However, before you decide to choose these systems you should ensure that you understand the way that the market works even when you do not have software to support you. This will make it easier for you to identify a situation where the autotrading system is not working according to your plan. Furthermore, it will make it easier for you to set the rules that will guide the trade to your benefit. Consider these pros and cons, and you will be able to make an informed decision on the way that you trade.