The Pros And Cons Of Automated Trading Systems


Technology has made trading easy and effective. Automated trading systems are computers used by traders and investors in monitoring and executing their trades. Automated trading systems are sometimes referred to as algorithmic trading, mechanical trading systems or system trading. This is a very common method of trading used nowadays and it has proved to be successful since trading can be done within a very short time and in the most effective manner. When trade entries have been programmed they can be executed automatically by use of a computer. These automated systems use stock analysis software to manage stock. Following are some pros of automated trading systems:

They minimize emotions

Using automated trading systems is very important because they help minimize emotions while you are in the trading process. It enables the traders to stick to their trading plans because their emotions are controlled and kept in check.

Diversify trading

Automated trading enables you to diversify your trading because you can be able to trade multiple accounts within a very short period of time. Within this type of trading, you can be able to trade various strategies in order to maximize your profits. In this way, you will have spread your risks over different instruments hence minimizing losses in your business.

Consistency is achieved

‘Plan the trade and trade the plan’ is one the biggest challenges that investors and traders meet. A trading plan can have the potential to be profitable but if it is not well planned then it can turn out to be a loss. Having the best stock analysis software is what will make trade successful and profitable.

Discipline is preserved

What do you think brings discipline as far as automated trading is concerned? Discipline can be preserved everywhere even in the volatile markets provided the trade rules are observed and established and trade execution done automatically. Following are the cons of automated trading systems:

Mechanical failures

What is done in automated trading is simply the setting up of the software, programming of the rules and then sitting back and watch as it trades. This is a very sophisticated trading method but it is not infallible. These systems in most cases rely on the use of internet and if it’s lost then an order may not be sent successfully.


With automated trading, you need to be around your computer all the time monitoring the way trading is done.  This can be tiresome and boring sometimes and the main reason why monitoring is necessary is because it can be easy for you to detect or amend any mechanical failures including issues like connectivity issues, computer crashes, power loss or system quirks.


Do you understand what it means by over-optimization? This is a term that is used in live trading to refer to the excessive curve-fitting which produces the unreliable trading plan. In conclusion, ensure you have the best stock analyzer in your automated trading systems because this will improve your trading and in fact, you will be able to maximize profits and expand your trade.


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