Pros and Cons of Online Trading Systems

pros and consTraders can easily alter the precise entry and exit along with monetary management into online trading systems which permit the electronic devices to monitor trades and execute them as well.

The greatest plus of utilizing an online strategy is that it has the power to eliminate emotions from the investment process. However, this article is going to shine a light on the pros and cons. It also shows the results of the reality check of trading systems.

What is An Online Trading System?

Online trading systems are also known as mechanical trading systems and algorithmic trading systems. These systems permit the traders to create a set of specific rules for the trade exits and entries. And once these rules are programmed they are easily passed out and executed through the computer system. The rules that are set by the trading systems can be anything based on simple preliminary conditions. They can be more complicated as well. It all depends on the type of strategies traders desire to conduct.

The prime requirement of an online trading system is the software that is connected directly to the broker. And the set of rules that are set must be written in the appropriate for the platform language.

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Pros Of The Trading Systems:

Having a computer monitor trades has a lot of advantages. The most basic ones of them are listed hereinafter:


As the trade rules are made and executed automatically, the entire procedure is remotely controlled. Traders often lose their grip of losing. However, the trading system helps for a more objective investment process.


Automated trading system maintain the level of rationality. Because they are not entirely involved in the investment process traders are able to see the opportunities more clearly. As the trades are executed automatically according to the rules that have been set by the user. This works for greater confidence in one’s abilities.

Back Testing

For the better determination of the viability of a trade, back testing is the best strategy. While one is creating an automated mode profile with the use of set rules, one needs to ensure that all of them are definite and there is no possibility for interpretation. Traders usually test them before they actually place a monetary amount. Back testing, however, allows them to appraise the trading idea and determine the expected wins and losses.

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The biggest dilemma in the trading world is to plan the trade and then invest according to it. Even if a plan looks like the best one; the traders who ignore the rules change the expectancy of the profits. No trading plan can assure 100% win situation. Losses come hand in hand in the trading world. But the losses bring an emotional impact as well and if a trader gets 2-3 losses in a row, he might be skipping the next round for sure. But one never knows whether the next one would have been a win. So, he might also be missing out on something.

However, an automated trading system allows consistency make its place in the trading plan.

Improvised Order Entry Speed

Computers have the great ability to respond to the changing market situations. It will generate orders as soon as the trader’s criteria are met in the market. Getting in or out of a trade with the small difference of a couple of seconds matters a lot. As soon as a position enters, all the orders are generated automatically. Markets move quickly and it is quite unpredictable when a trade could reach a satisfactory level or vice versa. The automated trading system can thus aid investors by leaving almost nothing to chance.

Diversify Trading: Automated investment allows the traders to utilize various strategies and accounts at the same time. Programming algorithms have the ability to analyze the financial world for opportunities across various markets. They also monitor the execution of the trading process.

Cons & Reality Check Of Automated Trading Systems

reality checkAutomated trading systems have a lot of benefits for sure. However, this does not make them absolutely perfect. They have their disadvantages as well. The reality check for online investment solutions show that:

Mechanical Failures

Automated trading robots can perform a lot of work in favour of the trader. At the same time, they do not possess only positive qualities. It depends on the trading platform if an order resides on a computer or its servers. This means that if the Internet connection is lost, an order might not get sent to the market. It is good to learn the curves of a software when one opt to use it.


Even though it is always best to turn the electronic device on and let it perform the trading process. But monitoring it is essential as connectivity troubles can come up. Or the device itself can crash. Traders can avoid all of this if they regularly oversee the automated software’s actions.

Over Optimization

People who opt for back testing can actually plan great systems on paper. But the said can turn out to be terrible on the market. By the means of over optimization, excessive curve- fitting could result in the execution of a plan that is actually unreliable in the actual trade. It helps traders to turn the tables in their favor and accumulate results from it.

With its attractive features, automated trading systems should never be viewed as a method to conduct easy-going traders. These systems demand constant supervision as mechanical failures are not uncommon for them. Being cautious is always a great idea.

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