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Angus Walker
After Friday’s US jobs figures, the markets appear to be sending out mixed signals. The numbers weren’t that bad according to Saxo Bank’s Head of FX Strategy John Hardy who says there was an “odd reaction”.
Article / 15 March 2012 at 14:13 GMT

7 Reasons to consider (or not) Automated Trading

Co-founder
Denmark

Let me introduce myself: I have about 9 years trading experience, and more than 15 years of involvement in software development.

Given my interest in in data mining, statistics, artificial intelligence, and natural language processing, I've become very interested in how these technologies can aid in automated trading.

Automated trading, or algorithmic trading, is extremely popular, but it has pros and cons.  Allow me to outline a few reasons you should consider (or not) automated trading:

 

1.     Automated trading removes emotion

You will need to learn how to adjust your attitudes and beliefs about trading in such a way that you can trade without the slightest bit of fear, but at the same time keep a framework in place that does not allow you to become reckless.”

Trading in the Zone by Mark Douglas

 

Emotion can be a real killer when it comes to trading – be it fear or greed.

Pros

Cons

Having an automated strategy can remove emotions from interfering with trading.

Being too emotionless can mean you fail to account for market sentiment when making trades.

 

2.     Automated trading frees up your time. 

“Market analysis is not the path to consistent results. It will not solve trading problems created by lack of confidence, lack of discipline or improper focus”

Trading in the Zone by Mark Douglas

Determining what and when to trade can be a time consuming task. It’s easy to spend hours analyzing charts, eventually falling victim to ‘analysis paralysis’.

An automated trading system can continually monitor the markets and trade.

Pros

Cons

Determining when to trade can take a lot of work. An automated trading system does that work for you, leaving you free to do other things.

Developing a successful automated trading strategy is certainly not an easy task. Expect to put a LOT of time into it! You WON'T get it right the first time. You WILL need to do a lot of testing. And you will need to do a lot of research.

 

3.     Automated trading is "always on"

Computers don’t need to sleep. And the markets are open 24/6.  Therefore a strategy can continue to earn profits – or losses – while you are away living your life.

Pros

Cons

Certainly, a successful automated trading strategy can make money day and night.

In order for your trading system to be  constantly working, also known as up-time, a high availability infrastructure also needs to be in place. This can be a costly endevour.

 

4.     Automated trading allows for historical testing

There are increasing numbers of trading platforms that offer Automated Trading. Metatrader is probably the most popular. Metatrader offers powerful functionality for testing trading strategies – so you can test your automated trading strategies using historical data. Metatrader's Strategy Tester also offers functionality to optimize the settings within your trading strategy, to help boost your profits.

Pros

Cons

The likes of MetaTrader do make it easy to do strategy besting, based on historical data.

While testing on historical data is certainly valuable, it is by no means a trust worthy test.  Back testing is based around the idea that there are patterns in market price movements, and that those patterns will appear again. This is an assumption – not a fact.

 

5.     Automated Trading offers you a community

So you want get some of the benefits that Automated Trading has to offer? Well you’re not alone! There are numerous resources online where you can learn from others, try existing Expert Advisors or even hire people to develop your automated trading strategy. For an example of a good Automated Trading community I recommend http://www.mql4.com/

Pros

Cons

An online community is a great resource for quickly learning how to develop an automated trading strategy. Generally the users of these sites are very friendly and helpful.

There are a lot of Automated Trading related communities, and they have a lot of content. So be prepared to do a lot of reading. And take what you read with a ‘grain of salt’.

 

6.     Automated Trading has been proven successful

MetaQuotes, the makers of MetaTrader annually host the Automated Trading Championships. The results are online – and are quite compelling!

Pros

Cons

Yes, the results of the MetaQuotes Automated Trading Championships are compelling.

Read the interview with the winners and you will see that many of them credit their success to luck and go on to say that they would not use their EA on with their own money without doing more development work.

 

7.     Automated trading is broker-independent

Many brokers these days provide either and API, often using the FIX protocol, or they offer MetaTrader. Some brokers offer both. This means that an automated trading strategy can be developed without specific broker logic being required, and, if you choose to, your strategy can easily be moved to another broker.

Pros

Cons

FIX and MetaTrader have made it easy to move between brokers.  

Not all brokers offer a FIX API, and not all FIX APIs are the same. There are many brokers that offer MetaTrader 4, so it is important to choose a reputable, trustworthy broker .

 

 

 

 

7y
shrikant195 shrikant195
after two year of searching i m unable to find any good expert adviser till now do u can suggest any one
7y
Anton Hughes Anton Hughes
That depends on your definition of 'good'. Often the Expert Advisers that show large returns also have poor money management. I know of some successful traders who always run an EA, but only for managing risk (ie, the EA sets the Stop Loss). Also, EA will perform very differently depending on what symbol/chart it is applied to, and the time period that it runs on. I think a good starting point is to define your strategy: start by writing a document that outlines, for example, the patterns you have identified, how you want to manage risk, the indicators you want to use, and even news events you want to avoid or trade on. Use this as your specification document that either you, or a software developer can create your EA from. In short, Automated Trading, and the use of EAs does require an investment of time, both for testing, development and understanding.
7y
AwarenessForex AwarenessForex
I would say buying a car requires an initial investment of time, researching testing to see which one will be a good fit for you. But it shouldn't take long; as the basic function of a car doesn't change. The old paradigm of looking at backtests or historical performance to prove an EAs worthiness was/is used for black box systems where the user has no idea what was in the EA and had to bet on luck that the system will perform (equity curve) the same way as in the past.

But if you understand the basic function of the EA and how it generates profits, then you are much more likely to make money consistently.
3y
Gustavo12 Gustavo12
The current economic amendments and technological growth has given us access to numerous trading platforms on the internet. Finding a consistent and reliable platform is crucial decision to make. However, it often depends on the needs and expectation of the potential users. You can make your decision based on the user’s reviews like present at http://www.judgebinaryoptions.com/Binary-Options-Signals . It will help you to compare the platforms on the basis of features and services. However, before you deal with anyone, you can try out trial accounts and see whether they are suitable for your trading style or not.

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