Good afternoon friends,
I have been writing articles for a long time, but since I have often questions from the beginners about what exactly the automated trading systems are, what are the advantages and disadvantages, etc. I have realized that I have not done specific series for beginners yet, so it’s time to fix it. This is the first part that opens up the new series, where we will have a look at the basics and with the time we will also go through more advanced topics.
What is automated trading, ATS (automated trading strategies), algotrading?
There are two basic ways how to trade on financial markets:
Discretionary trading is the method where everything from the decision to the execution is done manually.
Automatic trading simply means that everything is done automatically. Terms like ATS and algotrading mean the same thing as automated trading. There are no differences. We do not have to sit at the computer and decide manually what we are going to buy or sell. Automated strategy has its own strict rules and trades entirely on its own. A trader who trades with automated trading systems only checks the results.
What are the advantages and disadvantages of automated trading strategies?
Many traders think that automatic strategies are useless because they are not sensitive enough.
I will tell you my story. I deal with trading for 11 years. I worked for brokers, where I saw the results of many traders, thousands of traders passed through my courses. In all that time I met only one trader who had really the feeling for the markets. The reality I’ve seen is clear – most profitable traders are trading with automated trading strategies. Why? This is related to their main advantages.
The main benefits of automated strategies are:
- They do not make mistakes
- They respond to the market immediately and give orders during a fraction of a second
- They have no emotions
- They concentrate on the market 24 hours a day
Automated strategies have the main advantages exactly where humans are making most mistakes. It is natural to be emotional and do mistakes, but it does not belong to the stock market as it can be very expensive. Automated strategies are helping us to cover this.
There are of course situations when the automated strategy cannot properly evaluate the markets and a loss occurres. However, this is one loss from many trades and it is not something that would be harmful for our trading. If our strategy is properly built, it remains still profitable in the long run.
Personally, I am using automated strategies for several years and I would not change it, I have stayed with them and I will remain in the future too. At first, I was skeptical, but then I have started trading through them and now I know that it was worth it!
What’s coming next?
In the next articles, we’ll look at whether the automated strategies are good for beginners, what are their possibilities, what to avoid and what to go for. Also, I will show you how to work with automated strategies even when you’re not a programmer.
I am looking forward to see you here again next Monday with my next article.