In automated trading, traders define specific trade entry and exit rules and allow the computer to handle the order entry functions. Trade rules vary from simple to complex, and as long as the rules can be absolutely defined and fall within the functionality of the trading platform, they can be programmed as part of an automated trading system.

There are several distinct advantages in automated trading. Since the computer executes the trade orders, automated trading removes much of the emotion from trading. Discretionary traders, who manually enter and exit trades based on current market conditions, may find it challenging at times to "pull the trigger." Similarly, discretionary traders may also find it difficult to sit on the sidelines, and may end up overtrading out of fear of missing an opportunity. By removing some of the emotion, automated trading allows traders to "plan the trade and trade the plan."

Automated trading also eliminates costly pilot error mistakes (assuming the system has been developed and programmed correctly), and enables levels of speed and precision that would otherwise be unattainable for most traders who simply do not have the reflexes and accuracy of a computer.

Note: Always test a system before going live, and start with small lots once you do start trading in a live market.


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