Questions Regarding Automated Trading

Automated trading systems, also known as mechanical trading systems, algorithmic trading, automated trading or system trading, use computers to execute and monitor trades with trades placed automatically once specific criteria are met. The entry and exit rules for the trades can be based on simple conditions or complicated strategies. These systems require a platform that is linked to a specific broker and any rules that you want implemented must be available via that platform. There are advantages and disadvantages of automated trading systems and here we will look at some questions regarding these systems.

What are the Benefits of Automated Trading over Manual Trading?

Automated trading can happen 24 hours a day with no lags due to time zone delays. If the market is volatile, a delay can cost money. These delays can also be caused by the time it takes to make moment to moment decisions or from emotional questions. In other words, automated trading allows trades to happen faster. Taking the emotion out of trading offers additional benefits over and above the time delays this can cause. Traders will not be able to make losses due to pride or fear of failing when the trades are based on automated strategy which is almost entirely objective. The thrill of winning and the devastation of losing cannot impact a trader’s decisions when using an automated system. Particularly for inexperienced or emotional traders, removing emotion from trading can be very beneficial. This also results in the benefit of more consistent trading through the use and implementation of a trading plan that is precise.


How Do You Choose an Automated Trading Strategy?

Different strategies may work better for one type of market than another and therefore it is important to read the descriptions of the various strategies before choosing one. You need to choose a strategy and adopt it to work in the market you want to enter. Before choosing a strategy, you must watch it over a period, over a large number of trades. This will give you a bigger picture and show you how the strategy has performed over the long term.

How Do You Choose an Automated Trading Platform?

There are many questions to ask when choosing an automated trading platform. Check for short term and long term signals that you can set that offer realistic goals. Look for guarantees and check if there are hidden costs. Check out the customer service that is available. Make sure the platform is regularly updated and check how you will receive those updates. Check if there is a demo version and then use it to make sure you are comfortable with how it works and the results. The platform should be connected to a broker that offers you the service you are looking for. Question the broker’s commissions and fees, minimums and the spreads he offers. If you are a more experienced trader, you may be looking for a platform that offers customization options so make sure that is available.