Automated Trading Advantages, Disadvantages, Types And Everything You Want To Know To Get Started.
Automated trading is a method of investing in financial markets, such as Forex or CFDs, by using software that opens and closes trades automatically according to set parameters. It currently represents most of the orders present in the stock markets.
Many people who dive into the world of trading do not really have much knowledge about how to analyze the trading chart and make the decision to open an order. This has led to an increase in the popularity of automated trading systems.
By using tools, signals and news, this software analyzes the market. As a result, the trader will get a strategy of automated trading that we will explain later in this article on Noticias Diarias 24.
What is automated trading?
A program that enables traders to establish rules for joining and exiting trades is known as an automated trading system. The precise entry, exit, and money management rules can be turned into automatic trading systems by traders and investors, enabling computers to execute and handle trades on their behalf.
Once those rules are programmed, your computer can automatically trade according to those rules.
Auto trading systems are very affordable, all you need is a computer with an Internet connection; you don’t even need a large investment to get started.
The software of these automatic systems is usually paid and a programmer can adjust the settings according to the trader’s trading strategy.
Regardless of whether the robot is paid or free, automatic trading does not guarantee the performance of your investments.
If you already have an automated robot, do not hesitate to test it on a demo account before trying it on your real account.
How this trading works?
First of all, you need to choose a platform and set the parameters of your trading strategy. Take advantage of your trading experience to create a set of rules and conditions for your customized algorithms to apply your criteria and place trades for you. These factors are typically based on the timing of the trade, the opening and closing prices, and the quantity. For example, «buy 200 shares of HP when its 25-day moving average is above its 100-day moving average».
The automated trading strategy that has been set up will constantly monitor the prices of the financial markets and trades will be executed automatically when the conditions set in the parameters you have predetermined are met. The goal is to execute trades as quickly and efficiently as possible, and to take advantage of specific technical and market events.
We also present some simple items for you to follow and make everything simpler for you:
- Analyze the price chart autonomously.
- Determine the current market trend.
- Give signals.
- Consider economic news that may impact the currency market.
- Make automatic trades that potentially have profit opportunities.
Types of automatic trading systems
There are diverse types of automated trading:
- Free automatic trading software.
You can download this type of software for free on the Internet. However, if you choose this option, it is necessary to test them thoroughly before using them on a live account.
You can also use MetaTrader Expert Advisors. They are the most widely used automated trading software, as they provide trading signals and execute stock market orders by themselves.
- Paid solutions for auto trading.
- Develop a strategy and have it coded by a professional to test it and then use it in your trading account.
- Download a paid auto trading software. We advise you to make a deep study before choosing it, as there are many scams on the Internet.
- Copy Trading
We have included Copy Trading within the automated trading modality, since the operations are opened and closed automatically, replicating those of a trader.
How to create a Forex trading system
Here are the 2 preliminary steps for creating an automated trading system in the forex market:
- Develop a trading plan based on your capital.
- Develop an auto trading strategy with very precise positioning conditions and market analysis in order to send a clear message to your automatic software.
Which platforms can you find and use?
Your preferred trading environment will determine the tool you use. At IG, we offer our customers a variety of automated trading tools.
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ProRealTime
Automate your trading with assisted creation tools, which will allow you to build simple or advanced strategies without the need to know how to program. With ProRealTime you will have access to an advanced and easy-to-use back testing simulation to test your strategy. The platform features over 100 indicators and has been optimized to suit the needs of both novice and experienced traders. Get it for free if you make a minimum of four trades each calendar month.
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MetaTrader4
Customize your trading experience: create your own trading algorithms, create indicators and place a variety of orders. In addition, you can import Expert Advisors (EAs), who will help you find opportunities according to the parameters you set in advance. Expert Advisors can notify you about an opportunity or open a position automatically.
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API
Create your own platform from start and cutting-edge trading solutions. You can create your own algorithms from start using this platform. Utilizing IG’s industry-leading technology, orders are filled, making it simple for you to get the finest execution. You can view current and past prices, examine market tools and data on investor sentiment, keep preferred lists, and more.
What is the best platform you will find today?
Trading software represents the basic tool essential for the development of an automated system. It must be intuitive, functional, customizable and experienced. MetaTrader meets these characteristics.
You can find several versions of MetaTrader:
- MetaTrader 4
- MetaTrader 5
- MetaTrader Supreme Edition
- WebTrader
Of all of them, we can consider that the best automated trading application is MetaTrader Supreme Edition, as it has a large number of free Expert Advisors. It is an add-on that you download and add to the basic MetaTrader.
Optimize your system in MetaTrader.
A trading system cannot be 100% compatible with market conditions, so it is possible to optimize it by following the steps below:
- Go to the «Strategy Tester» in the toolbar
- Choose the exact EA you want to optimize
- Select the symbol you are interested in and the time frame.
- Fill in the time period you wish to optimize your automatic trading system.
- Check the «Optimization» box.
Just before you start optimizing your automated trading, remember to write in the AE parameters and «No» in «Expert property». This allows you to customize your AE test in MetaTrader optimization.
Once you have made these custom settings, click on «Initial Value» to start the optimization!
Once the optimization is finished, you can go to the results in the «Optimization Results» tab. The different results can be sorted by:
- Total number of trades
- Profit factor
- Expected remuneration.
- Drop in €
- Drop in %
- Input parameters
Just choose the best results to find the parameters that best match the time period tested.
Is it profitable?
Automated trading systems do not guarantee 100% profits, but they do ensure that you benefit the most from market movements, whatever they may be. The best automated trading systems work in a very articulate and consistent manner. Success in trading is based on knowledge, competence and skill.
But how can an efficient EA be obtained? As mentioned above, the best EA is the system that would do exactly what you would do for yourself, but automatically. In MetaTrader, you will need to create your own trading robot using the MQL programming language. There are many excellent and reputable MQL programmers who will code your trading strategy and create an EA designed for you at a reasonable cost.
Conclusion
Finally, we at Noticias Diarias 24 would like to remind you that it is essential to understand that no automated trading software can guarantee a 100% winning trade rate. Although automated trading may seem attractive for a variety of reasons, such systems should not be considered a substitute for carefully executed trading.
