Automated trading might be a new concept in the market but it is kicking pretty good. It is a mechanical trading system that takes into account special programming or development of an algorithmic pattern consisting of both the trade entries and the exits. It can be programmed singlehandedly the first time and then after that, it can be executed on its own via a computer or some other systematic device. According to an estimate, almost 75% of the shares that are traded in the US forex trading are completed by the automated trading systems.
In order for an automated trading system to work, it has to be linked with a direct access broker and any specific rules dictated by that platform’s repository language. There are various trading systems out there that serve as the broker for the algorithmic trading and can be used according to your specific requirements.
Establishment of trading rules
According to atmpartmart.com many of the trading platforms provide the users with wizards that allow the users to make selections from a list of commonly available technical indicators to make a set of rules which then can be traded on its own. Users can also manipulate the type of order and when the trade would be triggered. Although it might seem pretty simple the end game here is that the trader would have to work with the software developer to customize their copy of the automated trading according to their precise requirements.
Most of the time that is surfed by the trader and software developer is to set/establish the rules and code the program. Once the program has been coded duly and set into an executable file on a server or computer the algorithm goes live and starts selling/buying or performing other trade-related functions on its own reflecting the very settings infused within it.
Advantages of using automated trading
Advantages that can be reaped with the automated trading are kind of limitless but for the sake of putting out the most promising ones we will have to narrow down that list;
According forex-review, emotions can be a weary object getting in the way of achieving success by not deviating from a robust plan. But with the help of automated trading, the trader would be able to keep their emotions in check and play the game by following the rules and a dedicated plan which they have developed for the cause. Since using the automated trading the trade orders are executed automatically once the trade rules have been met, this means that the trader won’t be there when the deal gets executed to question the trade or hesitate from going on with it.
Backtesting might be a new concept in the field of automated trading but it is effective for sure. Backtesting applies to the synchronization of the current data with the historical market data in order to derive insight for the buying/selling decision and to check whether the new data is viable or not. There must be no interpretations whatsoever especially in the development process and that is where the backtesting comes into play, it delivers a clear and concise set of instructions to the computing algorithm which is then run by the computer. Because computers on their own can’t take care of problems and provide viable solutions in the afterglow they can only perform the tasks these are programmed to do.
Improvising order entry speed
Since computers have that kind of functionality where they can respond immediately to the changing marketing conditions. The automated systems are able to generate orders as soon as the trade criteria are met. Getting on or getting out of a trade can make a huge difference in the outcome of the trade and automated trade systems can do that for you. As soon as the position is generated all the other orders are then automatically generated.
An automated trading system can help you greatly with it, as soon as a place for great trade opens the automated system will count you in and as soon as a transaction is moving towards imminent loss, it would pull you out of it just like that.
Diversifying the trading
Automated trading comes with another benefit at hand which is permitting the user to trade multiple accounts or take on multiple strategies at the same time. What would take immense time from a human point of view can be achieved with the help of a computer in a matter of milliseconds? The computer can then scan for the trading opportunities across various ranges of markets, generating and monitoring the orders.
Drawbacks of the automated trading
Yes, you heard it right, where there are benefits also come the drawbacks in a consistent manner. Following are some of those to begin with;
A computer or the machine that is running your algorithm is a machine at the end and that is why mechanical failures or issues are bound to happen. If an internet connection is lost imminently then the order will simply remain in a computer not reaching a server system and not cashing in the entry to the user as well, thus ending in a huge contradiction.
Automated trading systems are not like switching on a computer and then leaving it to operate for the rest of the day, it requires monitoring. Only if it could be that simple then everyone would simply get an automated system and start making money off of it. You will have to dedicate some of your time in the process of achieving something out of it and this is where monitoring of these assets come into play.
In the end despite the errors or mechanical failures that might arise the automated trading is worth it because the number of benefits outweighs the drawbacks that the system poses. One of the most dedicated solutions is to go with the server-based platforms if you wish to avoid the mechanical failures while trading on a forex platform and being hurdled with the overwhelming sensation of running into more complexities.