The Dangers Of Trading With An Automated Trading Software

Many would have read reviews of the automated trading software. This seems to be an easy and quick way of getting rich. But unfortunately, there is more to this trading software that is not shown upfront to the traders.

The software that is advertised as a sure shot way to get rich come with more dangers than expected. Read below to understand the drawbacks of using the auto trading software and how it can even wash away your entire trading capital within seconds.

Drawbacks of using the auto-trading software

Here are some drawbacks of using the automated trading software:

  • Mechanical failure – The automated trading software works on the principle of setting up the algorithm, programming the rules into it and watching it trade. This, however, does not make it infallible. The software is exposed to mechanical failure. So this means that in case of a loss in the internet connection the order may fail to get sent to the market or may reach the market late causing a huge loss.
  • Monitoring the platform – Automated trading software needs to be monitored too. This is because there could be a failure with the technology or a computer crash. An anomaly could cause erroneous orders or lead to duplicate orders. Thus using the automated trading software does not mean one can leave it unmonitored.

The craze for the auto trading software

The auto trading software is highly in demand because it takes out the emotions out of trading. This is seen as a major boon but at the same time, this works to your disadvantage. The lack of emotion in trading means that you cannot step in to say that you have made a wrong trading decision. The algorithm does what it has been programmed to perform and this, in turn, leads to trades being taken that should not have been taken in the first place.

Trading is about probability and that means that a particular pattern or particular news may not trigger that same reaction all the time. If that had been true, then trading would have been a sure shot game. The algorithm may be programmed to look at trades based on a particular set up but there are chances that there could be some other news release simultaneously that may indicate no trading positions at all. The software, however, ignores the news and takes trade which leads to a loss of money.

This is a clear example of why trading without emotions is good but at the same time, one has to consider various factors before placing a trade. This is something that the algorithm is not programmed to do.