Advantages of programmed trading
1, which avoids human subjectivity.
Avoiding human subjectivity is both an advantage and a disadvantage of programmed trading. In futures trading, it is people's subjective judgment that benefits. Some excellent speculators have made huge profits in futures market trading, and their subjectivity is irreplaceable by programmed trading. But in the futures market, more investors' subjectivity can be said to be unreasonable. They should retreat when they enter and hesitate when they leave. Using programmed trading can avoid these ideas, that is, avoid the inappropriate subjectivity of most people in futures trading. The final profit of programmed trading will be lower than that of excellent speculators, but much higher than that of ordinary investors.
2. Investment risks are greatly dispersed.
Trading in the futures market largely depends on the probability of events, and no one can guarantee the profit of every transaction. So this requires us to diversify our trading, trade multiple varieties at the same time, and adopt different trading strategies when trading a variety at the same time. If all this is done manually, it will consume a lot of manpower, and some human weaknesses are inevitable. Using programmed trading can perfectly complete the above strategy and realize the maximum risk dispersion.
Disadvantages of conducting programmed transactions
1, there was a substantial withdrawal of funds.
Some programmed trading models are profitable in the long run, but huge funds may be withdrawn in the short term. Some investors have a vague understanding of programmatic trading and think that programmatic trading is a money-making machine. Always profitable. These investors may find that it is difficult to continue programmatic trading in this case of withdrawal of funds, thus missing out on the large profits that will appear later.
2. It may aggravate financial risks.
1987 The chief culprit of the US stock market crash was once identified as a programmed transaction in the spot market. At that time, the stock futures were lower than the share price, and index arbitrage investors would buy futures and sell stocks. If the stock price falls far enough, the portfolio insurance companies will sell futures contracts, which will lead to a new round of decline in the futures market, which will lead to further selling of stocks by index arbitrage investors, thus forming a downward cycle of self-reinforcing selling. Regardless of whether the stock crash of 1987 was caused by programmatic trading, programmatic trading at least contributed to it. Domestic stock index futures have repeatedly delayed the listing time, and the regulatory authorities may also be worried.