Five Reasons Why Automated Trading is Good
1. Trade with an Edge
The main reason I like automated trading is that I can trade knowing I have an edge. Too many people just jump in and trade a strategy without properly evaluating it. Therefore, they don't even know if they have an edge - a positive expectancy strategy.
I trade automated strategies that I have historically evaluated. My strategies have positive expectancy. That does not mean they will keep working, but I like my chances. This is much better than just assuming if I study charts long enough, I'll somehow devlop an edge!
It is hard to manually trade more than a few strategies. With automated trading, you can fairly easily trade 20, 30, 50 or more strategies. And being diversified is a great way to trade. If you don't believe me, just review academic financial research over the past 30 years - many papers show how good diversification is. Automation makes diversification easier.
3. Hard To Cheat
Many people who have one automated system like to turn it off and on - basically overrule it. That is not good. But, once you start trading 5,10 or more strategies, it becomes much harder to cheat on the systems - it is easier to just let them run without interference. That is usually a good thing.
4. Easy To Include Position Sizing
Once you have a strategy up and automated, you can include position sizing into your code. Then, as your account hopefully grows, the position sizes you take are defined by the algorithm, and that helps you keep your risk rules consistent.
5. You Can Do It Yourself
Once you commit to learning how to properly create your own strategies, it is possible to create strategy after strategy, in any market you choose, with any type of system you choose. You don't have to buy or lease strategies any longer - you can simply create your own!
Do you agree with this? Disagree? Have items to add to the list? Feel free to leave your comments below!