The greatest thing about automated trading is the ability to follow a systematic process to trading and to eliminate emotional decisions.
The reason that automated trading typically doesn't work is that every "system" performs better in some environments and worse in others. There are some markets that will kill your system. The problem is the EA/program is always working and doesn't care about this.
True automated programming is changing the program to match the underlying conditions. However, now we reintroduce personal bias and emotions which is why you need to know how to trade without programming.
Financial trading is moving every year more to automated trading - but this dosnt mean 100% automated. You can use a strategy to monitor your open position, to automatically enter a trade - or ultimately fully automated trading.
The main problem is automated trading requires a strategy, and a strategy need to be developed. Which boils down to, as long as you have no tool to develop strategies, automated trading is not accessible - unless you have a team of programmers to develop the strategy for you, which is no option for the retail trader.
I think that automated trading and manual trading are not that different. When you trade manually, you have to define rules to tell you what to do in a given environment. When you trade with an automated algorithm you just write the rules in the code. The emotions are still there because you can chose when to run or stop your algorithm.
Enventually, once you have a defined strategy and all the data available, automated trading will mainly allows you to process more information than a human can do.
I"m with @kovalrock in that they're not much different. Automating your strategy removes the angst of order entry and allows your orders to get into the market more quickly. This time savings may allow you to expand your universe of signals and develop new strategies that may not be viable with point and click order entry.
if you are referring to "automated trading" as using code or a robot to automate some functions, like managing a trade, trailing a stop, closing at a certain time or price, then I think automation is fine and hepful.
if you are referring to "automation" as a fully automated process where the code/algo actually decides when to open/close a position, I would suggest that this is not in fact possible while being consistently profitable. Trading platforms can only work with what they have as input data, and all spot forex platforms I am aware of are only capable of receiving "price@time" quotes and transactions. Thats it. IMO this is *not* enough information in and of itself (no matter how you slice and dice it) to make intelligent buy/sell decisions in any way that is more predictive than random chance (50/50).
I like the idea of automation taking the mechanical element out of trading.....like many processes automation can relieve humans of mundane and repetitive actities that just waste their time......and automation can do these faster and more efficiently than humans ever can
But trading is an art form and only a human traders experience and sixth since based on years of trading can provide the final decision to enter a trade
Someone here posted "The key to automated trading is proper money management" but I would say that the MAIN KEY is proper EA Management!!!!
As the Market changes you need to be up on tweeking and upgrading your EA. I used to have a Portfolio of 5 EA's all of which had different Trading Styles for different Markets and it worked very well.
There is no such thing as a "Set and Forget" EA. You have to spend as much time with them as if you were manually trading. Unless they have specified Filters they do not know to turn themselves off during Major News Events or Disasters. (I had five running on VPN when Japan was hit by Earthquake and everything Forex went crashing within seconds. THANK GOD, I was able to pull the trigger when such a Tragedy struck.
Pippa, there's a yes and no quality to this as the breadth of automated trading strategies is very broad. I have customers who have used the same autospreader logic for years very successfully and other algo logic with very little change for years as well. Many algo configurations are intentionally, and wisely, constructed with a large set of configurable parameters so traders can 'tweak' the logic on the fly. The base logic may never change, just various inputs and calculations. Automated execution can't really be bucketed into one category and the styles and expectations of automated logic can vary tremendously.