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Advantages of Automated Trading Systems


An Automated Trading System, also known as a Robot Trading System, is an apparatus that allows Forex traders the conveniences of establishing a defined set of rules and parameters for trade exit and entry points. Once these rules have been effectively configured into the system, Forex traders and investors are endowed with the competencies to transform specified exit/entry rules into automated trading systems that are used by computers for executing and monitoring the trades.

The entry and exit rules for trade can entail simple logic such as moving average crossover or complex strategies that demand comprehensive skills of a qualified programmer. The inherent advantages of automated trading systems are discussed below:

Minimize Emotions – By reducing emotions that are associated with a trading process, an automated trading system allows traders greater leverage in implementing the plan. Moreover, traders simply cannot deny or reason with the system since it automatically executes a trade once the trade rules have been realized.

Achieve Consistency – The consistency and efficiency achieved by an automated trading system is unparalleled and simply cannot be attained by human effort. Automated trading systems significantly reduce the likelihood of a trading loss by offering traders consistency.

Backtesting – Backtesting assesses the viability of the ideas through application of trading rules to historical data of the Forex market. However, during the designing process of the automated trading system, the rules that the system is configured with should be absolute and at the same time be devoid of misinterpretation. Primarily because the computer lacks logic and reasoning, it cannot be trusted with guesswork and choices. Careful and accurate backtesting enables traders to assess reconfigure a trading idea to make it most effective.

Preserve Discipline – Owing to the comprehensive automation of the entire process from the establishment of trade rules to their execution, traders are able to maintain discipline, even in predominantly volatile market conditions. In the absence of an automated trading system, discipline is generally compromised due to emotional factors. Therefore, indecision in traders for fear of monetary loss or pursuit of higher gains on investment would disturb the discipline. On the contrary, an automated trading system helps to ensure that order and discipline are maintained as the defined trading plan is to be followed down to the dot while also minimizing the likelihood of pilot errors.

Faster Order-entry Speed – As computers are highly responsive and adaptive to changing market trends and conditions, automated trading systems are able to generate orders the minute trade criteria have been achieved. In human-based trading, abandoning a trading session minutes or seconds sooner can greatly influence the final outcome of the trade. This is not the case with automated trading systems.

Diversify Trading – Unlike with human efficiency, an automated trading system allows the user to follow a wide range of strategies at one time and trade multiple accounts simultaneously. This potentially spreads out the imminent risks involved in a venture over a wide range of instruments, thereby reducing their adverse effect. Moreover, a task that would seem tedious and arduous to a human can be effortlessly driven to completion by an automated trading system in a matter of seconds.

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