Automated Day Trading – Good Or Bad

By on Jun 5, 2017 in General |

If you have been confused between manual or automated day trading, then you are not alone. The debate between these two options always comes up with some interesting new points.

Let us look at the various aspects of automated day trading in more detail.

What is Automated Day Trading?

Automated day trading involves the use of software for trading purposes. In manual trading, the trader would have to physically place the trade. This would involve steps such as choosing an asset, checking the various parameters and then clicking on the appropriate button to buy or sell.

On the other hand, in automated trading, the trader would set the required parameters. Then the software would automatically place the trade without any interaction with the trader as per the specified parameters.

Advantages and disadvantages:

Here are some of the top advantages and disadvantages of automated day trading.

Advantages:

  • Discipline: Maintaining discipline when trading is crucial and this can become even more difficult to do when the markets are volatile. It is not uncommon to find that emotions can get the better of a trader in the quest to achieve a slightly bigger profit. An automated trading system brings discipline into the trading plan by sticking to the plan always.
  • Consistency: One must always keep in mind that it is never possible to produce winning results all the time during trading. Losses are as intrinsic as winning and sometimes they can have a huge impact on a trading plan. Without an automated trading system, a trader might get influenced by a couple of consecutive losses and consider ignoring the rules of the plan. This could prove to be a bigger loss if the next trade were to be a winner. Hence an automated trading system is essential to maintain consistency in trading.
  • No emotions involved: Emotions can run high during trading. There are some traders who might not be able to stop and tend to go overboard while trading. An automated trading system can help keep the emotions under control and this makes it simpler for a trader to stick to the plan. It eliminates the tendency of a trader to doubt the trade as it is executed automatically once the parameters are met.

Disadvantages:

  • Monitoring required: Even though it is an automated system, it cannot be left without regular monitoring. There may be connectivity issues, computer crashes or even a power loss. It may even face issues such as duplicate or missing orders etc. If the system is monitored, an issue can be resolved faster.
  • System failures: Though there are some significant advantages of using an automated trading system, one must always keep in mind that it can fail too. It may face mechanical failures such as a loss in the Internet connection which can affect the trading. Like most systems, it is advisable to start with small size trading when you begin using it. Things get much easier once you are past the learning curve. One example of an automated trading system is FinTech LTD which is used in binary trading. While there are many positive reviews talking about how effective it is, there are others who call it a scam.

Conclusion

Using an automated day trading system can play a big role in the outcome of your trading. Trading can be affected even by a few seconds and an automated system can respond to changing market conditions immediately.

Whether you decide to use an automated day trading system or not would depend on your personal trading specifications and requirements.