Trading robots are commonly perceived as a sort of magic button. Once it is clicked, the system starts trading automagically, generating consistent profits. What can be better?
However, many pitfalls are hidden behind its simplicity.
In this educational article, we will discuss the advantages and disadvantages of trading with Expert Advisers (EA) / robots.
Let's start with the positives ➕:
The first major advantage of EA is the fact that it works 24/7, without delays and coffee breaks. Once it is launched, it will keep working till you stop it.
The second advantage of EA is that it is non-emotional and objective.
It strictly follows the algorithm and rules determined by a program. It is not influenced by psychological biases, making each trade extremely precise.
The third strength of trading robots is the processing speed and its limitless scalability. EA can monitor dozens of trading instruments on multiple time frames simultaneously, not missing any bit of information. Hence, it requires less time for decision-making and trade execution.
The fourth advantage of EA is the simplicity of its backtesting. Once the algorithm is written and the order execution rules are described, they can be quickly and easily tested on a historical data.
So far, sounds like a panacea, right?! But now, let's discuss the negatives ➖:
Similar to any software, app or program, the EA is vulnerable to bugs, and may occasionally lag. Therefore, it requires a constant oversight and maintenance. In order to fix the bugs and maintain that, a high level of experience is required.
One should have the advanced skills both in coding and in trading.
Moreover, admitting the fact that the market is constantly changing and evolving, one should regularly update the EA and adapt it.
In comparison to humans, trading robots are not learning, they do not evolve themselves.
Leaving the robot without supervision, updates and patches, it may blow the entire account in a glimpse of an eye without any embarrassment.
One more important thing to add about EA, is the fact that it is technical analysis based. For now, there are no solutions on the market that would allow the integration of fundamentals in the algorithm.
Unfortunately, most of the traders overestimate the strengths of trading robots, completely neglecting its obvious weaknesses.
If you decide to apply EA in trading, always consider its pros and cons that we discuss in the post.