Hands-free trading is a trading where automated software using algorithms and rules makes trades for you and it is estimated that approximately 70 to 80 percent of today’s trades are automated. This is a kind of trading system where you decide what your trade entries and exits are. It is a set it and forget it system in some ways, while you still maintain control of your trades and your exchanges. In foreign exchange trading as you likely already know, the trades aren’t as confusing as they are with some other trades in some respects, while being more confusing in others.
Forex automation software makes it very easy for you to eliminate some of that confusion and emotional decision making. On the other hand, with an automated system, Forex trading can be even more stressful as you run additional risks of mechanical failure interfering with your entire trading plan. If you are interested in automation software for your foreign trading, learn about the pros and cons here.
The greatest benefit of automated trading software is that the user can create their own rules when it comes to trade entries and trade exits, and this helps you with your money management strategy. When you are trading any amount of your own capital, the goal is to minimize your risk. Automated trading software accomplishes that for you by offering you the best of both worlds with brokers and automated trades. In Forex, brokers such as zenfinex.com provide tight spreads and competitive trading conditions with low commissions, key benefits enjoyed with automated trading software.
While being able to create your own rules is the greatest benefit of automated trading, emotional discipline is another key benefit. This is perhaps the greatest element that is motivating traders to automate their trades. With regular trading comes the element of risk and threat of losses with every decision. With automated trading, the decisions are made ahead of time and you know the risks in advance. You have more objectivity when it comes to automated trading.
In Forex, the market is more volatile than with some other trades, and in 2023, Forex trading has become more emotional than it has in recent years. Maintaining objectivity and discipline in Forex trading is made easier with automated software. This is the case regardless of where the emotions are falling. With automated trading in Forex, you avoid the moments of being too excited, or discouraged, when the market is rolling up and down.
Finally, diversifying is another key benefit of automated trading. Here you can list multiple accounts or trades and bring all of your strategies to the table. You don’t have to put all of your risk into one basket, but can diversify easier with less stress and more objectivity. Here you can use the automation to your advantage again, by exploring the best options.
The greatest disadvantage to automated trading is always going to be mechanical failure. When you leave your trades in the hands of anyone, you are going to worry about failure with the human or the robot. Mechanical failures are common and are responsible for some of the largest crashes in stock history. When you add automation to the table, you are depending on algorithms, which fail by nature because technical algorithms are going to fail on occasion. You’ll always be worrying if today is that day.
Additionally, adding component failures such as a slow internet connection or high network usage can change a day’s trade in a second. Timing is everything in trading, and when technical infrastructure is weakened or at risk, so too is your trade environment. Any objectivity or emotional discipline experienced through automated trading can be gone in an instant if the connection goes out.
With this comes the need for monitoring in order to overcome any issues you may have with automated trading and the potential mechanical pitfalls. This could incur additional infrastructure or operating costs to run your trades. Depending on your trading personality, this may not be feasible, or could be worth the investment.
Finally, when you are using automated trading software in Forex, what you may find is that you have rules that look good in theory when you are strategizing them, but don’t work well in the real world. A key reason for this in Forex is the pace at which foreign exchange is changing in the real world. When you want to use automated trading software in Forex, you need to have a system that can be as realistic as possible for you.
When you are thinking of automated Forex trading, conduct thorough research and perform a sound risk and benefits analysis before you do so. There are a number of extras that are necessary in order to ensure automated trading works the way you want it to, but you still can enjoy the benefits of greater discipline and fewer perceived risks. Still, you need to ensure your trading is monitored in almost the same way a human would, and have an infrastructure plan in place for emergency mechanical failures. Talk to a broker today as part of your research when performing this analysis.