Category: Internet

These days, traders can switch to automated trading systems that allow computers to monitor and execute the trade. Mechanical trading, algorithmic trading, system trading or automated trading, as it is often referred to, is a programming software that allows traders to set certain rules for trade entries and exits which is then executed by the computer. Based on simple criteria such as moving crossover average, the rules of trade entry and exit can be created. Sometimes some software makes use of more complex strategies which require good knowledge of programming language which is specific to the trading portal. Examples of auto trading software include the Brit Method, the TradeStation automated software that uses EasyLanguage as its programming language, the NinjaTrader platform that uses the NinjaScript as its programming language and many more.

 

  1. It reduces emotions in the trading process by keeping a check. This enables traders to stick to their plan of action.
  2. It has the ability to backtest and check the viability of automated trading. In real life scenario where no guesses can be made, backtesting allows traders to use past data to evaluate system’s expectancy and to estimate the approximate amount of win or loss per trade.
  3. It establishes discipline since traders are expected to set predefined rules for trade entries and exit.
  4. It helps attain consistency by trading the plan.
  5. With increased response time of computers, automated trading systems generate order entries quickly and are able to act fast to the changing conditions of the market.
  6. It helps in diversify trading by permitting the trader to trade different accounts at the same time.

Cons of automated trading software:

  1. It is prone to be affected by mechanical failures such as poor or no internet connection, power loss, fault in the programming software, virus attack, etc…
  2. Though the trading system is automated, some amount of manual monitoring is required to watch out for the above mentioned mechanical failures.
  3. It is often over-optimized making it look good during simulation trials but could run poorly in reality.

To conclude, automated trading software is a great and fun tool to use. It helps you earn a little extra money apart from your regular take home pay but with trading of any sort, comes the risks. For this you must do an extensive market study and be aware of online scams. When in doubt verify the authenticity by directly reaching out to these companies. Always establish relation with those companies that have been in the business for a long period of time.

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