What Is An Automated Trading System?
Automated trading systems, also referred to as mechanical trading systems, algorithmic trading, automated trading or system trading, allow traders to establish specific rules for both trade entries and exits that, once programmed, can be automatically executed via a computer. The trade entry and exit rules can be based on simple conditions such as a moving average crossover, or can be complicated strategies that require a comprehensive understanding of the programming language specific to the user's trading platform, or the expertise of a qualified programmer. Automated trading systems typically require the use of software that is linked to a direct access broker, and any specific rules must be written in that platform's proprietary language.
Advantages of Automated Trading Systems
There is a long list of advantages to having a computer monitor the markets for trading opportunities and execute the trades, including:
Minimize Emotions.
Automated trading systems minimize emotions throughout the trading process. By keeping emotions in check, traders typically have an easier time sticking to the plan. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade.
Ability to Back Test.
Back testing applies trading rules to historical market data to determine the viability of the idea. When designing a system for automated trading, all rules need to be absolute, with no room for interpretation (the computer cannot make guesses – it has to be told exactly what to do). Traders can take these precise sets of rules and test them on historical data before risking money in live trading. Careful back testing allows traders to evaluate and fine-tune a trading idea, and to determine the system's expectancy
Preserve Discipline.
Because the trade rules are established and trade execution is performed automatically, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of taking a loss, or the desire to eke out a little more profit from a trade.
Achieve Consistency.
One of the biggest challenges in trading is to plan the trade and trade the plan. Even if a trading plan has the potential to be profitable, traders who ignore the rules are altering any expectancy the system would have had. There is no such thing as a trading plan that wins 100% of the time – losses are a part of the game. But losses can be psychologically traumatizing, so a trader who has two or three losing trades in a row might decide to skip the next trade.
Improved Order Entry Speed.
Since computers respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few seconds earlier can make a big difference in the trade's outcome.
Diversify Trading.
Automated trading systems permit the user to trade multiple accounts or various strategies at one time. This has the potential to spread risk over various instruments while creating a hedge against losing positions.
Disadvantages and Realities of Automated Trading Systems
Automated trading systems boast many advantages, but there are some downfalls of and realties to which traders should be aware.
Mechanical failures.
The theory behind automated trading makes it seem simple: set up the software, program the rules and watch it trade.
Monitoring.
Although it would be great to turn on the computer and leave for the day, automated trading systems do require monitoring. This is due do the potential for mechanical failures, such as connectivity issues, power losses or computer crashes, and to system quirks.
Over-optimization.
Though not specific to automated trading systems, traders who employ back testing techniques can create systems that look great on paper and perform terribly in a live market.
Online Robotic Stock Trading System
You may have heard about automated trading systems. These computer-based trading applications are set up to automatically buy and sell securities on an exchange. As an investor, you subscribe to an automated trading service and fund your account, but because everything is automated, you don't need to spend a lot of time reviewing how the system is working. If you discover over time that you don't like a particular service, you can unsubscribe and move on to another one.
For getting this risk free trading system just register your number
Automated trading systems, also referred to as mechanical trading systems, algorithmic trading, automated trading or system trading, allow traders to establish specific rules for both trade entries and exits that, once programmed, can be automatically executed via a computer. The trade entry and exit rules can be based on simple conditions such as a moving average crossover, or can be complicated strategies that require a comprehensive understanding of the programming language specific to the user's trading platform, or the expertise of a qualified programmer. Automated trading systems typically require the use of software that is linked to a direct access broker, and any specific rules must be written in that platform's proprietary language.
Advantages of Automated Trading Systems
There is a long list of advantages to having a computer monitor the markets for trading opportunities and execute the trades, including:
Minimize Emotions.
Automated trading systems minimize emotions throughout the trading process. By keeping emotions in check, traders typically have an easier time sticking to the plan. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade.
Ability to Back Test.
Back testing applies trading rules to historical market data to determine the viability of the idea. When designing a system for automated trading, all rules need to be absolute, with no room for interpretation (the computer cannot make guesses – it has to be told exactly what to do). Traders can take these precise sets of rules and test them on historical data before risking money in live trading. Careful back testing allows traders to evaluate and fine-tune a trading idea, and to determine the system's expectancy
Preserve Discipline.
Because the trade rules are established and trade execution is performed automatically, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of taking a loss, or the desire to eke out a little more profit from a trade.
Achieve Consistency.
One of the biggest challenges in trading is to plan the trade and trade the plan. Even if a trading plan has the potential to be profitable, traders who ignore the rules are altering any expectancy the system would have had. There is no such thing as a trading plan that wins 100% of the time – losses are a part of the game. But losses can be psychologically traumatizing, so a trader who has two or three losing trades in a row might decide to skip the next trade.
Improved Order Entry Speed.
Since computers respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few seconds earlier can make a big difference in the trade's outcome.
Diversify Trading.
Automated trading systems permit the user to trade multiple accounts or various strategies at one time. This has the potential to spread risk over various instruments while creating a hedge against losing positions.
Disadvantages and Realities of Automated Trading Systems
Automated trading systems boast many advantages, but there are some downfalls of and realties to which traders should be aware.
Mechanical failures.
The theory behind automated trading makes it seem simple: set up the software, program the rules and watch it trade.
Monitoring.
Although it would be great to turn on the computer and leave for the day, automated trading systems do require monitoring. This is due do the potential for mechanical failures, such as connectivity issues, power losses or computer crashes, and to system quirks.
Over-optimization.
Though not specific to automated trading systems, traders who employ back testing techniques can create systems that look great on paper and perform terribly in a live market.
Online Robotic Stock Trading System
You may have heard about automated trading systems. These computer-based trading applications are set up to automatically buy and sell securities on an exchange. As an investor, you subscribe to an automated trading service and fund your account, but because everything is automated, you don't need to spend a lot of time reviewing how the system is working. If you discover over time that you don't like a particular service, you can unsubscribe and move on to another one.
For getting this risk free trading system just register your number
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