One of the biggest advantages to using an algorithm is there is NO EMOTION involved. Emotion in the human experience gives way to a lot of joys, but in the world of Forex, having emotion tied to an investment can lead you down a dark rabbit hole. Emotional attachment can create irrational decisions…and these irrational choices lead to greater losses.
An algorithm also takes a hold of diversification greater than with manual trading. An algorithm allows your portfolio to be greater spread. A better spread portfolio allows for possible hits and volatility to be spread so a large hit can be diminished.
Another positive to using an algorithm is the use of backtesting. This means that as a software, the computer must do as it is told to. This means programmers have often tested the algorithm and its performance against historical data to see how it will perform in the future. This rigorous testing allows you to make more potential gains based on the research done.
Orders are also executed faster. This means that as an action is placed by the algorithm, it happens immediately. Everything operates and is done faster this way. The market changes quickly and manual traders can miss out on great opportunities due to this. By having an algorithm running the show, these potential gains are not missed.
One last pro is that algorithms preserve greater discipline than manual trading. Manual trading can often be harmed by human error. With an algorithm there are no keystroke errors and no irrational responses to volatile market conditions.