Building Automated Trading Strategies October 2018 | Page 8

Advantages & Disadvantages of Automated Trading
Major Advantages of Automated Trading
✓ The greatest advantage of automated trading is that it is able to
minimize emotions throughout the trading process. The emotional
character of our human nature is highly disturbing our decision-making
process when we trade in any financial market. Fear, hyper-optimism
and other similar feelings deriving from the emotional part of our brain
are working against logic and finally against the odds of winning. This
emotional part is the worst trader there is.
✓ Manual trading has limitations regarding the stamina of our human
nature. An automated trading system never gets tired. Using a VPS
hosting service you can turn-off your PC and continue trading 24hours
per day.
✓ Automated trading offers the ability to easily and quickly backtest any
trading idea. It is very difficult to backtest manual trading strategies.
✓ Automated trading systems are also able to analyze simultaneously
multiple financial markets, and take advantage of trading opportunities
in a much shorter reaction time.
Major Disadvantages of Automated Trading
 The greater disadvantage of an automated trading system is that it can
deal only the market conditions that it is programmed to deal with.
That means that new market conditions deriving from major
fundamental changes cannot be interpreted and incorporated.
 A major event, such is a country’s default to meet its payments,
usually leads to extreme volatility in the market, and extreme volatility
can change everything. Semi-automatic systems may adapt better to
new market conditions, as they can be re-adjusted anytime.
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