Why do prominent market participants avoid on automated trading?

New comment
 
While there are many retail traders who use forex trading robots, big market participants such as institutional investors, hedge funds, and large banks tend to be more hesitant to rely solely on automated trading. There are several reasons why this may be the case:

1. Complexity: The forex market is a complex and dynamic environment, and it can be challenging to develop automated trading strategies that can perform consistently under different market conditions.

2. Risk Management: Institutional traders and big market participants typically have a more cautious approach to risk management and may prefer to rely on experienced traders who can exercise judgment and adapt to changing market conditions.

3. Limited Flexibility: Automated trading systems are designed to follow predefined rules and algorithms, which can limit the flexibility to adjust trading strategies in response to new market conditions or events.

4. Market Impact: Large market participants may be concerned that using automated trading systems could lead to market impact, especially in illiquid markets or when executing large orders.

5. Reputation Risk: Institutional traders and big market participants may be more concerned about their reputation and the potential negative impact of automated trading systems on their brand image.

In summary, while automated trading systems have their benefits, the prominent market participants tend to be more hesitant to use them due to the complexity of the forex market, the need for flexibility in trading strategies, concerns about market impact, and the potential impact on reputation. Instead, they tend to rely on experienced traders who can exercise judgment and adapt to changing market conditions.
 
Hansen:
While there are many retail traders who use forex trading robots, big market participants such as institutional investors, hedge funds, and large banks tend to be more hesitant to rely solely on automated trading. There are several reasons why this may be the case:

1. Complexity: The forex market is a complex and dynamic environment, and it can be challenging to develop automated trading strategies that can perform consistently under different market conditions.

2. Risk Management: Institutional traders and big market participants typically have a more cautious approach to risk management and may prefer to rely on experienced traders who can exercise judgment and adapt to changing market conditions.

3. Limited Flexibility: Automated trading systems are designed to follow predefined rules and algorithms, which can limit the flexibility to adjust trading strategies in response to new market conditions or events.

4. Market Impact: Large market participants may be concerned that using automated trading systems could lead to market impact, especially in illiquid markets or when executing large orders.

5. Reputation Risk: Institutional traders and big market participants may be more concerned about their reputation and the potential negative impact of automated trading systems on their brand image.

In summary, while automated trading systems have their benefits, the prominent market participants tend to be more hesitant to use them due to the complexity of the forex market, the need for flexibility in trading strategies, concerns about market impact, and the potential impact on reputation. Instead, they tend to rely on experienced traders who can exercise judgment and adapt to changing market conditions.

Thanks for the useful information. I most agree with the "Complexity" argument.

 
Yashar Seyyedin #:

Thanks for the useful information. I most agree with the "Complexity" argument.

You are welcome Yashar.. Good luck and success Brother
New comment