7 Pros and Cons of Automated Trading in 2022

The popularity of automated trading in Australia has been growing steadily. However, a habit of relying on algorithms has both advantages and disadvantages.

In this article, we’ll list the primary pros and cons of automated trading that you should keep in mind in 2022. In addition, we’ll provide you with recommendations on finding the best share trading platform in Australia.

Pros of Automated Trading

Opportunity to Work 24/7

Some trading platforms operate 24/7, without taking breaks for weekends and holidays. Tools of automated trading can keep working non-stop, even when the human trader is sleeping. They can benefit from every opportunity to make a profit that appears on the market.

No Emotions

Unlike people, tools of automated trading never get tired, stressed or anxious. Their decisions are always based on unbiased calculations and analysis. They act much quicker than even the most skilled person and never make mistakes.

Backtesting

The term “backtesting” means that all the decisions that an automated tool makes are backed up by historical data. Unlike humans, bots don’t leave room for guesses or interpretations.

First, the human trader “feeds” to the bot the historical data from the market and the statistics of their previous trades. The tool processes this information and builds a strategy that will determine its behavior in the future.

Such an approach doesn’t guarantee that every trade the bot makes will bring you the maximum possible profit. But it’s one of the surest ways of minimizing risks and boosting your odds to earn money.

Diversified Trading

Each automated trading tool can stick only to one strategy. If you want to test several strategies, you can open multiple trading accounts and assign a bot to each of them. That should enable you to keep making a profit regardless of the current situation on the market.

Cons of Automated Trading

Mechanical Failures

Bots might go down unexpectedly. You need to visit the trading platform regularly to make sure your tools operate as intended. The term “automated” is not synonymous with a total lack of human supervision.

Over-Optimization

When you carry out backtesting, everything might look fine until the moment when your bot begins to trade. A strategy that seemed great on paper might fail to generate a profit on a real market. You’ll need to thoroughly review and fine-tune it and keep testing until the strategy becomes sustainable.

Scams

Automated trading tools will bring you profit only if you use them on reliable platforms.
Plus, you should purchase bots from trustworthy developers.

Final Thoughts

Hopefully, you found this article informative and now you better understand the pros and cons of automated trading in 2022. On the one hand, bots have no emotions and can work 24/7. You can benefit from backtesting and diversified trading.

On the other hand, bots are prone to mechanical failures. You should remain vigilant to avoid scams and over-optimization.

To sum it up, we can say that automated trading tools can be very helpful – but only if you need how to set them up properly and monitor their efficiency.