The Good
Using algorithmic trading can be very beneficial for the average trader. It can give you the boost needed to actually profit from the markets.
The most notable advantages that come with algorithmic trading, also called expert advisors, are the consistency and the convenience.
The consistency comes from not having to make subjective decisions, therefore helping you make less mistakes. Trading robots will never trade with emotions. They never get caught in revenge trading, oversizing a position, or moving their closing parameters. They simply do as they are told and follow the game plan, as every competent trader should. Following the game plan means that you can statistically predict your results, and avoid long drawdowns caused by a bad state of mind.
The convenience comes from the lack of human intervention. If your EA is set up correctly, you should not have to intervene during its trading. This means that you could be doing any other type of work during the trading day, while still profiting from the markets.
You could potentially take advantage of algorithmic trading even without taking the time to program a system. It is possible to open an account with a broker that will apply a tested program to your portfolio. You should of course verify the credibility and the historical results of any EA that is presented to you as an investment opportunity.
The Bad
Using expert advisors can be very confusing for beginners, let alone programing one. One of the reasons why they are rarely used by the average trader is because of the technicality behind them. Creating an expert advisor requires a background in software development(if you wish to create an EA from scratch).
Testing your EA can also be very confusing, as using past data to confirm a theory will not necessarily create a profitable program.
It can be tempting to analyse past data and to come up with correlations between winning trades that are not actually relevant to trading the live market.
The amount of variables that need to be considered can be overwhelming, especially if you do not intend to dedicate a lot of time to programming your own EA. You should ask yourself why exactly you want to develop your own trading robot, as there are more simple solutions.
A programmer could possibly be hired to reduce the amount of labor required to attain your objective. Many freelancers offer their expertise at an affordable cost.
The Ugly
Here’s what automated trading sounds like to misinformed people: you click the “start” button and start making unlimited money until you click the “stop” button. Of course it’s not as simple as that, but certain people hope it is.
Where there are naive people looking to make a quick buck, there are people who will gladly prey on them and try to profit off their misinformation.
With a simple Google search, you will come across hundreds of strangers who would gladly offer you the magical algorithm to riches, at a cost of course.
With a bit of time, anyone can fake an equity growth graph and make a strategy appear profitable. You should look for statistics from reliable sources with verified results.
The majority of trading algorithms readily available online are scams. The creators or owners of profitable and consistent algorithms will protect their program as you would with any intellectual property.
The point is not that it is very difficult to have your portfolio managed by a good program, but that it is very difficult to put your hands on the actual software.
