If you are new to online trading you must have come across online investment platforms like the 1G Profit System ( know more about it by going through the 1 G Profit System Review review) where anyone who wants to make money can buy and sell stocks, mutual funds, and other financial products.
These platforms are the automated trading systems where buying and selling are done automatically by a computer. These systems use software that is programmed to adhere to certain rules and conditions and trade accordingly.
Advantages of automated trading
- No scope for emotions: Since all the processes are automated and individual involvement is negligible the usual emotions associated with the floor are missing. As a result, traders are in a better frame of mind, devoid of emotions to plan and strategize more effectively.
- Back testing possible: To know the efficacy of any strategy it is important to back test where the strategy is applied to past market information. This test will tell the trader the viability of a strategy and thereby reduce the risk of losing money in live trading.
- Disciplined approach: Since the whole process runs according to set algorithms and pre-conditioned programs discipline is always maintained on the floor, unlike manual trading where emotions override everything including discipline.
- Consistent: The automated techniques provide traders with consistent results; usually there are no surprises.
- Trade multiple accounts: You can trade on multiple accounts or adopt numerous techniques with automated trading. What is impossible manually is done effortlessly by the computer as it scans over various markets and monitors trade.
It is important to know the negatives of this trading system before you reach any conclusion on whether you need to switch to this system or stick to manual trading.
- Lack of human oversight: The gut feeling or human instinct is absent in this computer driven auto trading system. Traders have the innate ability to evolve according to the circumstances and win before been hit with the loss which is not possible with a computer.
- Needs monitoring: This system must be constantly monitored to avoid duplicate orders or missing of orders. The possibility of software bugs can’t be ignored.
- Mechanical issues: Loss of power, computer crashes, and unavailability of the internet are few of the other issues plaguing auto trading systems.
- Optimization issues: Though not specific to just automated trading, over optimization can give rise to false hopes and results which cannot be translated in live trading. So, what appears good on paper must not become the benchmark for your market experience.
If you are a newbie to the system you can certainly benefit from adopting automated trading but machines lack human insight and ability to adapt rapidly to a changing environment.