Advantages and Disadvantages of Automated Forex Trading

By
TradersDNA

Forex trading is one of the busiest trading markets in the world. Traders can choose to execute their trades by using either manual or automated trading systems. More than it was in the past, today, retail forex traders are following and installing auto trade guides on their terminals to help with smoother automated currency pairing.

Automated forex trading involves using a computer program with a set of analysis rules that help determine when it is the right time to buy or sell. The auto trader guide that the trader teaches to make decisions first must wait for a signal before generating an actual currency pair buy or sell order. All the trader does afterward after installing the program is switch on the computer and allow the software to take over the trading process. Like other software, automated forex trading software too comes with its advantages and disadvantages.

Forex Trading

Automated Forex Trading Advantages 

  • Emotionless Trading

One of the issues that affect manual trading success is allowing emotions to get in the way. Automated trading, on the other hand, does not involve human emotion during the process. The system uses set programs to enter and exit the currency markets after meeting certain set criteria. 

The automation process allows traders to trade without questioning particular trades due to fear of making losses. Furthermore, trading manually leads to emotionally draining after a loss, leading to overtrading and deviation from a trading plan in search of profit. Automation helps to maintain discipline because there are no emotions involved.

  • Easy Accessibility

Automated trading is open to both professional and unskilled traders alike. It does not favor one trader over the other when it comes to decision-making. The automation software also comes in varying sophistication and price levels with a demo that allows traders using it for the first time to familiarize themselves with its ins and outs before implementation.

  • Provides Diversity

Auto trader guide enables forex traders to trade different markets and multiple accounts while using various trading strategies simultaneously. Diversification allows the forex traders to stop risking everything on one endeavor and spread their risks using varying trading instruments and markets for better chances at profit-making.

  • Backtesting Ability

Before using the automated system in a real-time environment, traders can backrest the automation software to check on the historical price data of the system’s criteria. The move allows traders to improve their trading strategies and better understand the expected system risks versus rewards.

  • Faster Entry Speed

Financial markets move fast, making an entry or exit speed play a huge role in trade success. Unlike manual trading, automated trading software places orders by responding immediately after satisfying predestined criteria.

Automated Trading Disadvantages

Even though automated trading appears easy, it is not the same thing in reality. It would help if you learned more about it before installing it into your computer. You also need to know that despite all the benefits, it also comes with some disadvantages.

  • Needs Regular Monitoring

Many people assume that all you need to do when using automated trading software is switch on the computer and allow the system to do the rest. The thinking is not wrong because automation is for-to allow a trader to carry on with other business as the system does the trading. 

However, the system is non-infallible and needs regular monitoring due to malfunctions, loss of internet, and other technical failures. Other issues that make monitoring necessary include software malfunction that could duplicate orders or loss of orders.

  • Over-Optimizing

Some traders believe that automating their systems provides them with more winning streaks, which is not true. Because of this belief, they tend to over-optimize their trading strategies for unexpected occurrences in the currency market. Implementing an over-optimized strategy into the live market could lead to unreliability in future trading events.

Wrapping It Up

Implementing auto trader guides to take over currency trading is a great idea as it makes trading easy, more accessible, faster, and more diverse. However, it also comes with a few disadvantages that a trader cannot overlook before implementing the software system. Overall, it saves traders from cumbersome manual trading and provides 24/7 hour trading time parameters.

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