More people interested in trading and finance about investment services through automatic trading systems, sometimes depending on the timing, refer to this type of investment schemes as trading robots, SAT etc …
The concept of automatic trading systems
The concept that automated systems are based trading is really simple: instead of doing their own research or pay high fees for a money manager, these services allow investors to place their funds and let the algorithm is that dedicated to take care of everything.
When a new technology or new investment vehicle arrives in the financial world, investors tend to be very excited expectant about the final solution on their finances.
Then the excitement extends, so that most of the investment community tends to use these products or services.
This kind of euphoria, we could assimilate to the price of a share of stock is driven higher due to increased demand. Sometimes this movement is justified, sometimes not.
When it comes to automated systems of trading , this is a product with lights and shadows
These services offer advantages definitely. The problem is that some investors see as the alpha and omega of the investment, a substitute for other investment strategies. As technology makes this potential, there are some reasons why an investor would actually taking on greater risk with one of these services, despite lower rates.
The great myths about trading robots
Here we leave the main myths that revolve around the automated systems of trading .
These trading robots “are only for the young geeks”
There is a misconception that small investors wary of companies that offer automatic trading systems. This is probably because it is a relatively new technology, fitting with the concept of new technologies.
They are perfect for long-term investors performing techniques of “buy and hold”
This would only be true if the behavior was in a perpetual upward movement. Unfortunately, there is no known algorithm to predict the markets. When the market becomes unpredictable, technology can not protect you or spit a solution, whereas a fund manager, at least, can help develop strategies on how to minimize the risks to the downside.
Money managers typically charge 2% a year, but if the market collapsed by 40% -50%, the 2% spent to preserve capital, it would be a victory.
Another downside is that technology does not allow investors to gain experience and improve their skills.
The automatic trading systems is something like managers and financial advisers
That’s a big mistake. First, financial advisers are not money managers. In fact, a good financial adviser advises on potential or firing hire a money manager.
A financial advisor has a more global approach your financial situation, taking into account investments, debt, cash flow planning of university education (for children), retirement planning, tax savings, etc.
In most cases, a personal relationship with family is formed. An automatic system is unable to carry out such functions, nor is their main task.
Automated trading systems or robots replace humans
Robo-advisors are not usually sought after by high net worth investors. Many of these investors want to sit down and strategize with (human) money manager. Many of these customers are type A personalities who like to have control over a situation. A robo-advisor is the antithesis of what they want, and this applies not only to a class of investors. Others simply want control over their money. This will never change.
Expert Advisors automated or automated trading systems are manipulating the market
Ironically, many financial planners are starting to use automated services as a complementary offer.
The advisers may use different systems and automated management tools portfolio and offer its customers a great customer experience.
This type of platform was built due to high demand and curiosity about the operation of automatic systems that operate in the markets. Thus, financial planners save time in the portfolios of stocks and bonds, which in turn will allow them to spend more time with customers to other needs such as retirement planning and estate planning.
Since then the technology in some points, you can not replace a human advisor. Despite the low rates, investment in VTI, will offer even lower rates and the possibility of higher returns. That said, a robo-advisor is probably the best choice for an investor who wants different systems vary.