Benefits of Mechanical CFD Trading
Traders are always looking for an additional edge in the market. Any products or knowledge that they believe will tip the scales in their favor becomes highly demanded. With technology becoming cheaper and faster, mechanical trading has become very popular for traders looking for an advantage. Mechanical trading occurs when a computer program operates a trading strategy on its own by buying or selling a CFD following a set of defined trading rules. Today we will discuss the benefits to mechanical trading and how it could improve your CFD trading experience.
Mechanical Trading Can Eliminate Strategy Deviations
Whether it is intentional or by accident, there are times when traders will deviate from their strategy to their own detriment. Think about the following list of strategy altering actions and see which ones sound familiar to you: overriding a limit order by closing out a winning trade early to lock in a small profit, leaving a losing trade open past your stop loss because you feel the trade will turn around eventually, placing a larger than normal trade size to “get back what you lost,” not taking a trade because it “just didn’t feel right,” or forcing a trade even though the setup wasn’t quite as perfect as you like.
My guess is at least one of the scenarios listed above has happened on your own CFD trading account at one point or another. The fact of the matter is that this can lead to serious consequences and could turn a winning strategy into a loser. The great thing about automation is that these deviations are completely eliminated. Computers can only do what we tell them to do. So if your strategy is to follow a specific set of guidelines, you know the mechanical trading system will follow them. If you find yourself being an emotional trader, this reason alone could be enough to turn towards mechanical trading in your own account.
Mechanical Trading Can Save Time
My favorite benefit of mechanical trading is how much time it can save. Ninety percent of the workload is put in at the beginning to develop the strategy and have it programmed either by you or a professional. Once this initial step is complete, the only work left is monitoring the strategy to make sure it is functioning properly. So if you are working a 9-5 job and find there are not enough hours in the day to trade the CFD market the way you want to, let mechanical trading give you those hours back.
Mechanical Trading Strategies Can Trade Around the Clock
We mentioned at the beginning of the article that traders are always seeking ways to gain a trading edge. The final benefit of mechanical trading is its ability to locate and trade more opportunities. It is able to accomplish this feat, as it is capable of searching for trades 24 hours a day, 5 days a week. Unlike humans, computers never sleep. They can be up and running, looking for trades based on our strategy, and manage those trades with ease. Depending on how much time you devote to trading on a regular basis, a mechanized version of your strategy could produce several times more trading opportunities by functioning around the clock.
Mechanical Trading Can Trade More Instruments
There are many CFDS out there, and with a tight schedule it is often difficult to keep track of them all in an effort to place more trades. But with mechanical trading, the strategy that you used to trade a specific CFD like silver, might be applicable to gold and oil as well. All it takes is a few more minutes to setup, and your strategy could trade as many CFDs as you would like it to without any ongoing effort on your part. This also gives you the benefit of diversification alongside a greater number of trading opportunities.
Notes:
There are many ways in which mechanical trading can benefit a CFD trader. It can help ensure we never deviate from our trading strategy, it can save us time, it can trade 24 hours a day, and it can enable us to trade more instruments than we ever thought possible. The time spent researching mechanical trading can be well worth the investment.
