Have you ever wondered what the pros and cons of automated trading systems are? Why is it essential to understand the pros and cons of one of the most popular ways of trading in the crypto world right now?
First, automated trading systems are also referred to as algorithmic, mechanical, or just “system trading.” They enable traders to set up specific rules for trade exits and entries that computers can execute automatically once they are programmed.
More than 70% to 80% of shares traded in the US stock market have come from automated trading systems.
The importance of auto-trading platforms
There are also numerous high-quality auto-trading platforms. If you’ve read the BitiCodes review in detail, you will have a clear picture of how these platforms work and their benefits and possibilities.
These platforms and similar tools allow the trader a simple, easy, cheap, and efficient trading experience where they have easy access to cryptocurrencies and new opportunities for trading in the volatile crypto market.
However, do you know exactly the pros and cons of automated trading systems? Let’s find out!
Pros of automated trading systems
- Backtesting – It helps determine the viability of an idea. Careful backtesting enables traders to fine-tune and evaluate a trading idea.
- Improving Order Entry Speed – Automated systems can generate orders immediately after meeting trade criteria. Orders get automatically generated, including profit targets and protective stop losses.
- Minimizing emotions – These specific systems help in minimizing human emotions through the process of trading. If their emotions are in control, serious traders can more easily stick to their trading plans and goals.
- Preserving discipline – In volatile markets, discipline is preserved. It happens because trade execution is automatically performed, and trade rules are established well.
- Diversifying trading – Users get permission from automated trading systems to trade various strategies at once or on multiple accounts.
Cons of automated trading systems
- Monitoring – Automated trading systems need to be monitored, even if you think you can turn off the computer and leave for the day. It’s due to the possibility of power losses, connectivity issues, system quirks, or computer crashes.
- Over-optimization – Even though traders can create trading systems that look great, they can be very disastrous in a live market. Over-optimization isn’t good because it may produce an unreliable plan in live trading.
- Mechanical failures – Automated trading systems can be infallible. A trade order might reside on a computer, not a server. So, if you lose internet connection, for example, an order probably won’t be sent to the market at all.
How can you avoid scams in automated trading systems?
There are a lot of scams in automated trading systems out there. So, while searching for your preferred system, it’s crucial to comprehend how to avoid potential scams. Here are the top tips for that:
- Do deep research and read the terms and conditions of a chosen system.
- Check for legitimate testimonials, third-party sites, and financial regulatory sites for honest systems reviews.
- Ensure to scrutinize all costs before paying them to save your money in the end.
- Check if a system comes with a trial period since many spam systems won’t offer it to you. Good luck!