There is a significant shift occurring in the markets as we speak, some of you may have heard of it but have not given it due attention. You might have thought that it was just a new fad or it will not gain traction, but the reality is, automated trading is becoming more and more popular day by day.

As traders you know that it is important to adapt to markets as they continuously shift and change. This applies to everyone regardless if you are a value or momentum trader, invest in low risk income assets or if you are a high end foreign exchanges trader.

Technological changes affects every single one of us and it will catch up to us whether we like it or not. The current trend regarding automated trading is so strong that I’m confident you have seen a media story about automated trading by one of the mainstream platform providers/brokers or even on your news feeds. It has arrived and it is here to stay.

Many analysts see this phenomenon to be the next big thing in electronic trading and are expecting it to take over most of the trading volume (if it  hasn’t already) in the near future.

But what is  automated trading and why has it become so important in ones trading?

Automated trading is simply a set of buy and sell rules which can be programmed to run 24 hrs  a day 5 days a week. These rules are the same when you trade manually like many traders today. They reside on your computer and they monitor and analyze the markets  for you even when you are not in front of your screens and  if necessary, trade on your behalf.

The ability to trade 24hrs a day enables traders to make the most of any good trading system. For example, it allows Australian traders to  take advantage of many trading  opportunities in the late European session or most of the US session which would have otherwise been missed due to the time differences. This means your trading is effective when opportunities present themselves.

Many people talk about taking the emotion out of trading, but lets be honest this is not something many traders do very well.  Some research suggest we get twice as emotional in a losing trade than excited in a winning trade. Compare this with automated trading which is completely neutral (no emotion at all). Automated robots simply don’t care if we have lost or made money in our previous trades. They logically assess the market and make a decision to buy or sell based on the available capital, market information and our specific rules. They never get tired or stressed and won’t make typical mistakes such as over trading or not trading at all. They simply do their job regardless of how you feel at the time.

The ability to react fast is another great advantage of automated trading. Many of us trade in some of the fastest markets (like FX ) and need immediate logical decision making ability to place a trade. Unfortunately our brains are not designed for such high speed, rapidly changing environments. We have all made bad decisions when we are rushed and are under pressure. Automated trading algorithms on the other hand , will never feel any pressure and can handle many operations in a split second. Therefore they can process all the available information and make the logical decision when our brains usually stall.

Do you need to consider it or should you completely dismiss it?

By their very nature automated trading systems  should be objective and quantitative (Otherwise computers won’t be able to make any sense of them). Therefore you can easily evaluate and test your strategies. We have discussed in our previous articles that objective and quantitative trading systems are superior to discretionary systems, don’t take our word for it read this article.

The main reason for this is that you can reliably measure the performance and robustness of an objective system and the results of such system should be replicated regardless who operates them. This option simply doesn’t exist for a discretionary system which can easily be affected by our own biases, emotions and lack of accurate calculations.

Keeping the above in mind , we believe that automated trading is definitely the way to go. You are up against some very smart professionals in this game who have an edge and you need to be equipped with the most cutting edge tool to win. The trend has already started with many professional traders already taking advantages of benefits of such systems.

What are the risks and failures?

As appealing and convenient automated trading systems sound, you should also be aware of the potential risks especially if you are dipping your toe in the water for the very first time.

One source of risk for automated traders can be created by  technical failures. Lost or slow connection to servers is when your system can’t communicate with the market. This can be very costly if you are in the middle of a trade and your system is unable to respond.

Bad tick or erroneous data produced by your data feed provider or broker is another potential issue which you need to be on top of. These ticks can create false alarms and therefore make your system trigger undue trades. Trading with a reliable platform provider and knowing exactly how your system works can minimize this risk to a great degree.

It is  extremely important that the automated trading systems are based on sound economic and verified trading rules. At the end of the day ,these systems can only do what they are programmed to do. “Garbage In Garbage Out ” is an old saying amongst automated traders which basically means that if you don’t spend enough time to perform thorough due diligence on the trading rules you are going to implement , the results are going to be very disappointing.

That’s why building your own systems lets you go deep inside to understand how they are structured. Therefore you should be very cautious when offered off- the shelf automated trading robots (also known as Expert Advisors ) especially those that promise you the world for a small fee.

I will leave you with this thought, if you had a system that worked so well, how much would you charge for it? Goldman Sachs spends millions of dollars developing their systems.


Yes the article is geared to the positives of automated trading but is does so because our preferred approach at Trade View is to learn and create our own systems and we think it is important that all traders do the same. This way you will know exactly what your rules are, you  will remain in charge of your trading system and can make necessary amendments when market conditions call for a new updated version of your trading rules.

The design and implementation of automated trading systems are a delicate process but can be taught with some practice.  We at  Trade View have an effective program for pro-active traders who want to take advantage of such innovations. In our In-House Systems Building Workshop we teach and mentor our traders on how to design and trade automated systems which suit your personal trading preferences.

Our Online Systems Building Workshop goes one step further as we can guide you and give you access to three trading models and mentor you for 12 months.

Either way don’t let the markets pass you by and trade outdated models.


Leave a Reply