Home Digital Marketing 4 Cons to Automated Trading Systems You Should Know

4 Cons to Automated Trading Systems You Should Know

When using an automated system to execute a trade, for as many benefits as there are, there are still many risks involved that would result in stock loss requiring you to hire a stock loss lawyer. Many individuals may view automated trading systems as avenues to supply more income. Others, on the other hand, intend for these systems to be their regular stream of income. 

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It is unfortunate for some individuals who have banked on automated trading systems as a quick source of considerable revenue.

What Are Automated Trading Systems?

They are also known as mechanical trading systems, automated trading, algorithmic trading, or system trading. These are systems that allow traders to develop specific rules and regulations for both their trade entries and trade exits that, once they have been programmed, can be executed automatically on a computer. 

Some platforms have reported close to 80% to 90%, or thereabouts, of shares traded on America’s stock exchanges are generated from automated trading.

What Are Some Automated Trading Cons?

1. The Inability to Make Unrestricted Choices

The fact that you somehow take an action in the system that only operates during a certain time or only makes your trades at the end of day, is limiting. This restricts you to your own initial choices, some of which you may not like the outcome of several hours after you initiated the buy. This could cause you to pay more than intended for the stocks or lose a ton of money because you couldn’t sell fast enough. One should keep in mind this outcome when first venturing into automated trading systems.

2. It Could Be Expensive to Develop

Developers know that most of the trading systems are long term and may take a while before deciding to upgrade or change. Having factored that in, they come up with outrageous prices for the service offered by these systems. However, before investing in automated systems, ensure to contact the developer to know their thought process in coming up with the system.

3. Automated Systems Rely on Internet Connection

If one does not have a robust and reliable internet connection, it could cause systems to malfunction and, in turn, cause a chunk of losses.

4. Prone to Mechanical Failures

Theoretically, it seems simple to set up the software, set up the rules, and sit back as you watch it make trades. As much as automated business is not liable to error, the fact that it is, for instance, reliant on the internet connection could mean that if your system is programmed to make an order or to process an order, you could lack to do so when the internet goes off.

5. Dependence on Tech

As much as automation is intelligent, it isn’t foolproof. According to research, trusted algorithms are bound to fail. Of course, nothing could ever be 100% sure, but most traders may expect systems to bring in 100% profit returns. Also, some developers scam you by creating programs that seem too good on paper. Most times, these systems are not as practical they seem.

Ho Do You Avoid Scammers

While searching for a system that you prefer, keep in mind that when it seems too good to be true, in most cases, it probably is. There are always many scams on the web. You should especially be careful of the systems that tend to guarantee very high profits at a low price. There are ways you can quickly tell if a system is legit or fake. This can help you avoid scams.

  • Before paying for anything, ask questions to avoid losses.
  • Before you choose to commit, make sure to research the system you intend to invest in.
  • Check for third-party reviews on the system.
  • Go for systems that offer a trial period for easy cancelation.

As much as Automated trading systems give traders attractive and unique opportunities for their trading activities to be boosted, it’s wise prudent to comprehend the risks involved.