Automated trading: For speed of execution and discipline in your trading 

April 29th, 2024
 

Why choose automated trading at all? Why not simply trade manually? In today’s fast-moving markets, when it comes to execution, a machine can beat a human any day of the week. Manually, you can see a signal or a setup, but by the time the image travels to your brain and sends the message to your hand to trade, the opportunity is gone. There’s just no competing with the power of automated trading.

In the recent NinjaTrader Ecosystem webinar, “How to Evaluate and Select an Effective and Suitable Automated Trading System,” James Buchman of ninZa.co discusses the two main advantages to automated trading: speed of execution and discipline.

Now, consider the discipline component. We all carry baggage into trading, and automated trading takes the emotion out of trading. For example, you may move a stop away as a trade is moving against you, because you don’t want to take a loss. If you take a loss, you can get frustrated and break your rules or make up rules on the fly, thinking you see something that doesn’t exist.

Automated trading: Removing the emotion

Automation in trading takes the emotion and potential breach in discipline out of your hands. It forces you—for as long as you allow the program to trade—to follow your rules and/or your business strategy. The algorithm is rule-based in automation. It doesn’t matter if you take one loss or consecutive losses; your trade automation will keep you on track with your previously setup trading plan.

Buchman adds that it’s important to realize you can lose money trading with automation, just like you can any other way. Traders lose money not from trickery but from emotional trading, which then transfers itself into discipline or lack thereof.

Buchman goes in depth on automated trading  in the full presentation.

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