BENEFITS OF AUTOMATED TRADING SYSTEM

Minimizes Emotions

Automated trading systems minimize emotions throughout the whole trading process. By keeping emotions under control, you can easily stick with your defined trading plan.

Since trades are executed automatically once the trade conditions have been met, traders will not be able to hesitate or question the trade.

Aside from helping you pull the trigger, automated trading can curb those who are apt to overtrade-buying and selling at every perceived opportunity.

Backtesting Abilities

Backtesting refers to the application of trading rules to historical market data to determine the viability of the idea.

When designing a system for automated trading, all the rules or conditions need to be absolute, with no room for interpretation. Since the computer isn’t really famous for making guesses, the program should tell it exactly what to do.

Traders can take these rules and test them on historical data before risking money in the live trade. Careful backtesting lets traders evaluate and tweak their trading idea, and to determine the system’s expectancy – or the average amount that a trader can expect to win or lose per unit of risk.

Preserves Discipline

Because the trade rules are established and trade execution has been performed, discipline is preserved even in volatile markets.

Discipline is often lost because of emotional factors like fear of taking a loss, or the urge to eke out a little more profit from a trade.

Automated trading helps ensure that discipline is maintained because the trading plan will be followed exactly. 

Also, “pilot error” is decreased. For example, an order to buy 100 shares will not be incorrectly entered as an order to sell 1,000 shares.

Consistency

One of the largest challenges in trading is to ‘plan the trade and trade the plan’ and even if a trading plan has the potential to be profitable, traders who ignore the rules are altering any expectancy the system would have had.

There is no such thing as a trading plan that wins 100 percent of the time. Losses are always a part of the game.

However, losses can be psychologically traumatizing, so a trader who has two or three losing trades in a row might want to just skip the next trade. If this next trade would have been a winner, the trader has already destroyed any expectancy the system had. Automated trading systems let traders achieve consistency by trading the plan.

Improved Order Entry Speed

Since computers respond instantaneously to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met.

Getting in or out of trade a few seconds earlier can make a big difference in the trade’s outcome. As soon as the position is entered, all other orders are automatically generated, including protective stop losses and profit targets.

Markets can move quickly and it’s quite demoralizing to have a trade reach the profit target or blow past a stop-loss level before the orders can even be entered. If you use an automated trading system, this can be prevented.

Prices in the Forex market can move excessively rapidly, especially during the volatile periods. Before entering a trade, it is essential for you to know what you stand to gain or lose from it. Forex Profit Calculator is the simplest way to calculate profit or loss while trading forex.