7 Certain Risks Using Automated Trading

[fxfarmerashik]

Automated trading has now become very common these days. People are getting attracted to it day by day. Though it is only a robot so it has certain risks.

So, today I’ll be disclosing 7 certain risks of automated trading. Therefore without any further ado, let’s begin-

Mechanical failure

The theory behind automated trading makes it seem simple: Set up the software, program rules and watch trade. In reality, however, automated trading is an advanced method of trading, but not perfect.

Alpaca originally only going to support algorithms that run on your own computer, so that your trading system will be located on your computer — and not the server.

What that means is that if the internet connection is lost, the command may not be shipped to market.
There is also the potential loss of power, the computer crashes, or some other system peculiarities of the algorithm can stop you from walking or causes anomalies.

Monitoring.

Although it would be great to turn on the computer and leave for the day/week, automated trading systems that require monitoring or alerting system.

This is due to the potential for mechanical failures, such as connectivity problems, power loss or crash the computer and custom systems as mentioned above.

It is also possible for automated trading systems to experience the anomalies that can result in errant orders, lost orders, or duplicate orders. If the system is monitored and / or an alerting system, these events can be identified and resolved quickly.

Trading Experience

The level of trading experience with the automated trading system is important in deciding how you should choose your overall trading strategy. Very complex strategy with many variables makes it difficult to determine whether the trade will execute designed to benefit.

Starting with simple automation strategy will allow you to develop a learning experience and trading method that works best for you.

Over-optimization

Although not specific to the automated trading system, traders using backtesting techniques can create a system that looks great on paper and do a very in-market life.

Over-optimization refers to excessive curve-fitting that produces a reliable trading plan in live trading. It is possible, for example, to tweak the strategy to achieve outstanding results on tested historical data.

Traders sometimes wrongly assume that a trading plan should have a nearly 100% profitable trades or do not have to experience withdrawal to be a viable plan. Thus, parameters can be adjusted to create a “near-perfect” plan — which really fails as soon as it is applied to the live market.

programming differences

Maybe there is a difference between “theoretical trade” generated by the strategy and order platform component that turns them into real trading.

Most traders should expect a learning curve when developing automated trading systems, and it is generally a good idea to start with small trade sizes or doing “paper trading” while the process is being refined.

No High-Frequency Trading

Platform alpaca is NOT a high-frequency trading platform. While automated trading strategies can be sent trading to the market at a high frequency, Alpaca does not support either the necessary speed data stream market or trade execution speeds needed for the high-frequency trading program works as intended.

Strategies automated trading that has excessive dependence on the speed of market data and execution speed will not be able to compete effectively with the merchants who have state of the art equipment and very short high-speed connection to the market, especially when the connection you use for the internet is through an internet service provider housing.
Dependence on Risk-Reducing Orders or Strategies.

With automated trading, replacing the market monitoring by placing a specific order (eg the command ‘stop-loss’ or ‘stop-limit’ orders) which are intended to limit losses to certain amounts may not be effective because market conditions do not allow to execute such orders.

At the time, it was also difficult or impossible to liquidate a position without incurring substantial losses and Alpaca platform does not provide manual intervention processes available.

To conclude, despite all the risks automated trading is very profitable these days. So, what do you think about automated trading?

Let me know.

[Guest Epicollapse]

It goes without saying, that like any other compulsive behavior such as gambling, spending long hours on the internet to shop, browse or game, can produce a rush of dopamine, the brain chemical associated with pleasure. This creates an experience that is similar to that of a drug-induced high, which can be the catalyst for developing symptoms of internet addiction. What can we say, if you can pay for it, sitting at home. Frankly speaking, I was shocked, when I read the article on usave.co.uk. Do you know how many are the ways of paying for internet? About 8. You shouldn't even go outside, it's convenient and crazy simultaneously. What do you think about it?