Why Automated Signals?
Minimize Emotions. Automated trading systems minimize emotions throughout the trading process. By keeping emotions in check, traders typically have an easier time sticking to the plan. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade. In addition to helping traders who are afraid to “pull the trigger”, automated trading can curb those who are apt to overtrade – buying and selling at every perceived opportunity.
Ability to Backtest. Backtesting applies trading rules to historical market data to determine the viability of the idea. When designing a system for automated trading, all rules need to be absolute, with no room for interpretation (the computer cannot make guesses – it has to be told exactly what to do). Traders can take these precise sets of rules and test them on historical data before risking money in live trading. Careful backtesting allows traders to evaluate and fine-tune a trading idea, and to determine the system’s expectancy – the average amount that a trader can expect to win (or lose) per unit of risk.
Preserve Discipline. Because the trade rules are established and trade execution is performed automatically, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of taking a loss, or the desire to eke out a little more profit from a trade. Automated trading helps ensure that discipline is maintained because the trading plan will be followed exactly. In addition, pilot-error is minimized, and an order to buy 100 shares will not be incorrectly entered as an order to sell 1,000 shares.
Improved Order Entry Speed. Since computers respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few seconds earlier can make a big difference in the trade’s outcome. As soon as a position is entered, all other orders are automatically generated, including protective stop losses and profit targets. Markets can move quickly, and it is demoralizing to have a trade reach the profit target or blow past a stop loss level – before the orders can even be entered. An automated trading system prevents this from happening.
Diversify Trading. Automated trading systems permit the user to trade multiple accounts or various strategies at one time. This has the potential to spread risk over various instruments while creating a hedge against losing positions. What would be incredibly challenging for a human to accomplish is efficiently executed by a computer in a matter of milliseconds. The computer is able to scan for trading opportunities across a range of markets, generate orders and monitor trades.