When executing trades with an automated system, there are many added benefits, but that doesn't mean there are no risks involved. Many look to systems as a means to supplement their income while others intend it to be a full time stream of revenue, and unfortunately there are individuals who have been conditioned to think it is an option to make a lot of money quickly.
First let's debunk that theory; trading systems, especially automated are not designed to make you a millionaire overnight. The intention of the system is unknown without further explanation from the developer. Quality trading systems are developed for many reasons including long term growth, short term income or even a combination of both. Before investing your money, speak directly with the developer to ask what his or her intent was for building the machine to get a better understanding, and help you make an educated decision if it is beneficial to your style of trading. You may also consider asking the following questions:
- Can I trade multiple markets simultaneously?
- Can I trade multiple time frames?
- Which market conditions can I trade?
- Can I adapt the trade times?
- Can I determine my own risk tolerance?
- Can I trade multiple asset classes?
- Can I adapt the automation settings?
- What type of logic is the system built on?
Let's look at some of the pros and cons that may help you determine if automated trading is right for you. This choice may be the best decision of your life, or quite possibly one of the worst so don't take a leap until you've gotten some questions answered such as the above.
Automated Trading Pros
- Reduces emotion by making non subjective trades
- Allows you more free time to enjoy other things
- Trades while you sleep for more opportunity
- Push button backtesting & optimization
- Micro-second decision processing ability
Automated Trading Cons
- No ability to make discretionary choices
- There is no room for error in your logic
- These systems can be costly to develop
- Does not adapt settings without user input
- Malfunction may occur if internet connection is lost
In the video below we use the Automated SD Model to further explain some functionality capabilities that can be implemented into trading systems. Advanced methodology will be largely dependant on the programming and trading knowledge of the developer and coder(s). Click here to view a member discussion on the SD Model.
Spend some time learning how to read the markets without software. This will help you achieve a level of understanding that will allow you to differentiate the good from the bad systems available. Having knowledge is power, without it you may be buying a system that is sure to fail. Ask the questions, make sure the logic is sound and spend the time it takes to research the methodology. Hopefully these tips will help you to make a more educated decision to purchase a trust worthy system for your trading.