Financial markets are complex, and managing them is not easy, especially without the tremendous effort and time required to establish a profitable and stable long-term track record.
In recent years, along with the development of markets and technological advances, sophisticated and intelligent trading systems have been developed. These systems take into account different stages of automated trading and have become very popular in recent years.
Automated trading refers to a method of participation in financial markets through software that implements pre-defined rules for entering and closing operations. As a broker or trader, you will fully integrate technical analysis using configuration settings for your trades, such as trailing stops, open orders, and guaranteed stops.
Automated trading allows you to perform multiple trades in a short time, with the added advantage of removing feelings from your trading choices. This is because every rule of the trade is already incorporated into the rules that define them. With several algorithms, you may even use hypothetical strategies to track trade and trends accordingly.
How Automated Trading Operates
First, you will select a trading platform and set your trading strategy limits. You will use the trading experience you have to make a set of rules, after which the custom algorithm gets to employ the criteria to perform trades in your place. These features generally depend on your trade’s timing, the opening and closing price, and the total amount. For instance, “buy 100 shares from Apple when the 50-day moving average is over the 200-day moving average.”
The auto trading strategy implemented will continuously monitor the market’s financial prices, and the transactions will get executed automatically if the pre-set criteria are met. The goal is to execute your trades faster and efficiently and make the most specific technological market events.
Advantages of Automated Trading
Here are some benefits of automated trading
• Adapt your strategy to your schedule – perform trades automatically, during the day or at night
• Perform multiple operations in real-time simultaneously and eliminate manual execution
• Identify new prospects and analyze developments with a wide variety of indicators
• Lessen the impact of the gut and emotional reactions with prearranged strategies
Different Automated Trading Methods
1. Copy Trading
This technique allows users to copy trades opened automatically by an expert trader trading on several financial markets. Copy trading is implemented using systems that communicate with both moderators and users, with an expert trader in between. An investor can “copy” each trade executed by the other trader automatically to replicate his account’s performance through copy trading. It depends on getting a trader who meets the user’s standards and then configures its settings to begin copying the actions.
2. Expert Advisors
The Expert Advisor program collects and processes large amounts of data to create a complex model according to a set of pre-defined rules (YES/NO). The system analyzes asset charts and collects indicator data according to the selected strategy. By determining the trend and the time at which the trade opens, it calculates the trade volume according to the account size and the risk level. Expert Advisor then manages it based on what is taking place in the market, and the strategy guidelines before the deal closes.
3. Algorithmic Trading
It operates using complex algorithms and refined trading systems that perform trading operations in fractions of a second. Auto trading activity performed by algorithms is found on both online trading platforms and trading robots. These complex factors can discover market movements and their factors at full speed. They can also perform thousands of trades before a human broker can perceive them and start trading.
4. Social Trading
This refers to a technique that permits traders to disclose their trading book, market-entry instructions, and exit points to other traders. The exchange takes place through dedicated marketplaces that act as a hub for all traders to reveal their concepts and ideas.
Finally, due to advancements in technology, automated trading is now embraced by many individuals. Here you will find the advantages and some methods of automated trading that you can employ.