Advantages of using Automated Trading Software
The beginning of 2020 created a special moment for retail trading: Increased market volatility, stay-at-home orders, also increased first-time traders, many in their 20s and 30s, found the stock market accessible.
Automated trading software provides many benefits to traders. Here are a few of the most significant advantages:
– Transparency – Automated trading software is typically more transparent than manual trading because it provides a record for all orders and transactions. It allows investors to monitor their own accounts and auditors to monitor the overall market.
– Less Human Error – Automated trading software can make the trading process more efficient and cost-effective. It helps streamline trades and reduces human error since everything is automatically executed for you.
– Guaranteed Access to Prices – The use of automated trading software allows investors to execute trades at any time of day or night across international borders, adding flexibility that many traders desire.
– Improved Execution & Price Improvement –Automated trading software can help improve execution, leading to better prices on trades. It is because the trades are executed in small batches, sometimes leading to higher returns than traditional trading methods that focus on large orders.
– Reduced Trading Costs – The use of automated trading software allows traders to achieve lower transaction costs than through traditional trading methods, which can often cost on the order of $10 per trade.
Some Disadvantages of Automated Trading Software
Although automated trading software provides many benefits, it also has a few disadvantages for investors to consider. Here are some potential drawbacks:
– Costs of Implementation – The use of automated trading software typically costs on the order of thousands or tens of thousands of dollars, which can be a high cost for most retail traders.
– Red Tape – Some automated trading software can include significant amounts of red tape regarding the buy-in and monthly subscription fees. It may deter some investors who want to make a one-time purchase rather than an ongoing commitment.
– Security Risks – The use of automated trading software can also introduce new security risks, especially if the computer used to run the program is compromised. This could potentially expose investors to viruses or other types of malware that may harm the performance of their investment portfolios.
– Implementation Still Requires Technical Knowledge – Automated trading software provides many benefits, but it still requires some degree of technical knowledge to implement and use. This can be a major drawback for investors who lack this type of expertise or experience.
Whether or not Automated Trading Software is Right for Your PortfolioAlthough automated trading software provides many benefits, it can also introduce some drawbacks that may deter investors from using it. It’s important to weigh the pros and cons carefully before deciding whether or not automated trading software is right for you.
In the end, whether they use automated trading software or manual processes, traders need to make sure that their investments are appropriately managed and monitored. Automated systems can be an excellent option for those who want improved execution and price improvement across all trades. Still, it’s essential to weigh the pros and cons before committing to one.BuySide Global offers advanced best-in-class indicators for Ninjatrader.
Poor implementation of automated trading software can lead to security risks, including malicious viruses that can harm your computer. Be sure to consider all factors before committing to any type of automated software!