Automated trading (Autotrading) consists of a string of algorithms that enable trade executions based on pre-programmed instructions. Are you looking to try out forex autotrading? this article will point out advantages and disadvantages of forex autotrading for you.

Automated trading (Autotrading), also known as algorithmic trading (algo trading) and black box, has gathered many fans across the years despite of its controversial state. It consists of a string of algorithms that enable trade executions based on pre-programmed instructions. Are you looking to try out forex autotrading? this article will point out advantages and disadvantages of forex autotrading for you.

autotrading forex

 

Advantages of Forex Autotrading

1. Achieving objective trading decisions and avoiding emotional interference.

Pre-programmed instructions in forex autotrading is usually based on strategy built over technical analysis and a set of risk management. The trades are automatically executed as long as a set of rules are fulfilled at any given moment. Therefore, decisions to open and close orders, as well as in determining stop loss and targets are more objective than if it is done personally by ourselves. After all, as forex trader, we often breach our own rules due to greed and fear, which almost always ends in losses.

Forex autotrading system will not hesitate to execute orders or closing positions, no matter what the situation is. It will not allow us to stray from pre-made trading plan. This is different compared to when we face the trading platform ourselves, because then we will likely think twice or at least considering several what if.. scenarios that in reality is not in line with our trading strategy.

 

2. Testing strategy in a relatively short time.

Before applying a new trading strategy, of course we have to try them out first. However, testing a new strategy manually will need time and energy which we may not have, especially if we wanted to use it soon. However, forex autotrading system can be tested in a short time by backtesting. Backtesting is practically testing a set of rules to historical data which is quite a competent trial and error method which can only be done if the system is a forex autotrading system. Backtesting also allows us to adjust the system's setting until it reach optimum gain potential before using it to trade

 

3. Optimizing profitability by acceleration of execution speed and diversification of assets.

When we trade manually, we will need some time to recognize market conditions and receive confirmation that a certain position can be taken. However, as a program, forex autotrading will not need that much time to digest market informations. As we have mentioned before, The trades are automatically executed as long as a set of rules are fulfilled at any given moment.

Even more than that, if we trade manually, then we will not have the ability to observe a lot of pairs, but forex autotrading enable remote observation not only of an array of currency pairs but also other assets at the same time. When favorable condition appears on several charts at once, traders who trade manually will experience difficulties in taking all of the opportunities in timely fashion, but autotrading can easily do that.

 

Disadvantages of Forex Autotrading

1. Weak fundamental recognition.

However, as all trader may experience in their early days, there are no flawless strategy. At one point or other, a strategy shall fail. It might be when we encounter a unique market condition like black swan, or when we put too much fund on an order with high percentage of uncertainty. Whatever it is, if we do the trades personally, we may avoid great loss due to timely understanding of market fundamental. However, autotrading is like a robot that is unable to recognize changes that are not included in the initial program. Like a robot that is not taught to understand what red in a traffic light means, it will go forward although the light already changed from yellow to red.

 

2. Inadequate infrastructure.

To operate autotrading, continuous internet access is a must. Therein lies the most significant weakness of forex autotrading: internet access in a large part of the world is unreliable, and in the other parts, maintaining the access 24/5 is not cheap. To resolve this key issue, there are VPS hosting services, but it is not cheap either. Conclusively, overall autotrading overheads might be higher than if we do the trades manually. Trading result may increase, but if the cost also rises exponentially, then it is just fifty-fifty.

 

3. Delicate programming.

If you know that forex trading is not easy and building a reliable strategy requires remarkable efforts, then imagine making a program out of that. If you have not already understand programming, then it will probably take months or years for you to establish a reliable program. Of course, there are free and paid autotrading system out there and you probably can make use of any one of them. However, how would you differ between the scams and the bonafides? Yeah, right, you should already have understanding about forex trading and programming to some degree.

 

Conclusion

There are many advantages of forex autotrading. However, it does not mean that we can just leave our account to the program and harvest the profits. It is also possible for forex autotrading to experience errors like any other computer programs, and infrastructure too has to undergo maintenance check once in a while. Therefore, routine check-ups are necessary to repair infrastructure malfunction and prevent fatal failure. It is not a 100% accurate trading method, although it is not a fluke either.