Automated systems are essentially mechanical systems where the trades are now executed directly by the computer.
The rules for the mechanical trading method can now be coded up and entered into a computer programme such that the program can perform all of the calculations relevant to the entries and exits and then utilise an integral order execution network to place and fill the trades directly. In other words the computer can be left completely unattended to trade for you.
In theory with automated trading you can turn your systems on and go away for a holiday and leave the computer to diligently take all the trades according to the specified rules. Automated trading systems therefore have all the evidential advantages of mechanical trading systems plus they also fully automate the entry and exit procedures such that no human intervention is required.
Most institutional money is now traded using mechanical systems or more probably fully automated trading systems.
My own experience in trading suggests that for private home based traders automated trading should be the culmination of the learning process rather than seen as a short cut right from the start of the learning process.
We have to start with discretionary trading methods so that we can learn about trading and complete our apprenticeship if you like. Once we have gained some hands-on experience and if we are looking to make six figures a year consistently from trading then I think mechanical trading systems or automated trading systems are probably the way to go. This is because they are true evidence based methods. Through back testing they prove that the method would have worked for the last five or 10 years or whatever and this in itself gives the trader many many advantages over discretionary trading methods.
Automated systems have the edge over mechanical systems because they allow you to trade many more markets simultaneously and also trade on much shorter timeframes and allow the trading day to be extended much longer than would be possible for a human trader. Imaging trying to monitor one minute price bars on 8 emini or forex instruments simultaneously whilst also calculating and placing entry and exit orders, trailing stops etc. It would be impossible to do this manually whereas automated trading systems make this simplicity itself. They also have many other advantages such as they never get tired so can trade 24 hours per day which allows the trader to “sweat” his margin money.