Pros And Cons of Automated Trading System

Trade is the part and parcel of marketing. We have been talking about digital marketing, DeFi platforms, cryptocurrencies, etc. Amongst all these elements “Automated Trading System” is yet another abstraction about which one must be aware. But before we discuss its pros and cons, as the title suggests, let us understand what is meant by the Automated Trading System.

What is an “Automated Trading System”?

An automated trading system also called an Algorithmic trading system or Mechanical trading system, is a set of algorithms written particularly to carry out the online trade. Using these algorithms traders can also define the rules for the trade and exchange. Once the trade regulations are met trade orders are executed automatically.

Pros of Automated Trading Systems

• Minimizes labor and time — Since the whole system works on a digitized algorithm, a lot of time and manual labor is saved.
• Speed and Accuracy — Without manual labor, the system makes it possible for the traders to buy or sell multiple numbers of entities at the same time and with accuracy.
• Backtesting — The system solely abides by rules/regulations that are specified in the algorithmic codes, hence there is no chance for various manual interpretations. It only works according to the interpretation of rules set while designing the algorithm, which is the same for all.
• No Emotional Involvement — The entire system of trade and exchange is done by the sort of robots which perform according to the given algorithmic conditions, which means there is no involvement of emotional negotiations among human beings.
• All-time Availability — It eliminates the whole process of appointments and time management, as there is no involvement of man-force.
• Lay-outs the Diverse Options — It enables the user to trade across multiple accounts at the same time.

Cons of Automated Trading System

• Technical or Mechanical Limitations — There is a difference between mechanical work and manual work. Despite technical advantages, there are some mechanical limitations like an abrupt failure due to loss of electricity or algorithmic inefficiencies that can lead to serious loss.
• Requires Regular Monitoring — Even if it functions automatically once the algorithms are set, it requires regular monitoring to keep the system updated and identify and enhance the mechanical follies in time.
• Requires Technical Knowledge — Any person who lacks the required technical knowledge is inefficient to monitor the system.
• Over-Optimization — Due to the mechanical limitations of an elaborate system of trading, that works out very well manually, may not work well mechanically.
• Subjected to Market Risk — Online markets are more dynamic than manual shared markets, where the values of entities change within minutes/seconds, and the trader becomes more vulnerable to economic failures as well.

Should You Automate at All?

Examining the pros and cons of Automated-Trading, it may seem to be a simpler option for earning profits. But, before investing in automation, one must also be prepared to face situations involving loss.

If you have enough knowledge of digitized marketing you may buy data through various platforms like eToro Copy trading, Bitcoin Prime, TeslaCoin, Meta Profit, etc. Other than that, you may also create personalized server-based automation that would enable you to lay out your own set of rules to trade.

Personally, our suggestion would be to gather enough experience or information before diving into the Automated-trading world, as the dynamic nature of the market doesn’t take your instinct into account, sometimes it also depends upon luck.

Final Thoughts

With the proper knowledge of marketing, digital platforms, working of cryptocurrencies, etc. anyone can use Automated Trading systems. However, it doesn’t work well with people having partial knowledge about either marketing or working of algorithms, unless the trader has both or at least a reliable team that could work together to make it a success.