Twenty years ago the barriers to entry for an indvidual trader or trading club looking to start an investment fund based on a fully automated or algorithmic system were incredibly high. Access to information was limited, data could not be transferred as quickly, and processing times were slower. Fast forward to 2011. Thanks to continued advancements in technology it's now possible to run a multi account trading fund out of the basement of your home. As a result, interest in automated trading is on the rise as individual traders look to be their own self-appointed fund managers. Here are a few reasons why:
This advantage doesn't necessarily appeal to the FX junkies who remain glued to their screens at the wee hours of the night. For the rest of us though, automated trading makes it possible to participate in the market while you are catching your Zs.
Attempting to backtest a manual trading strategy poses a series of challenges. This isn't an issue with automated systems. There are even platforms such as MetaTrader 4 (MT4) that allow the user to backtest a strategy at no cost to the user.
The greatest difficulty a trader faces is deciding when to pull the trigger. For those who have struggled in the past or never mustered the courage to trade on their own, an automated system offers them an alternative to a market they otherwise would not have considered.
Many traders enjoy running systems while simultaneously placing trades on their own. As an example, you might be comfortable trading EUR/USD but have nightmares about the last time you bought GBP/JPY. Instead of avoiding volatile pairs you can allow a system to trade it on your behalf.
You like the idea of trading but by the time you've run some errands, made dinner, and put the kids to bed you realize the time you blocked off for trading isn't going to happen. An automated system allows you to still participate in the market even if you don't have the time for it.
The FX market offers traders access to an unprecedented amount of leverage, meaning movements as small as a fraction of a penny can result in substantial gains or losses. When deciding upon a system I suggest assessing your tolerance for risk as well as the capital set aside for trading before you allow it to trade your funds.