When trading in the financial markets, a trader can choose to monitor every price movement round the clock, or take advantage of automatic trading systems. No matter what your preference is, you will need a functional and user-friendly trading terminal to become a successful trader. MetaQuotes’ MetaTrader 5 is an excellent option if you want to enter the financial markets.
With automated trading systems, traders no longer have to monitor their trades 24 hours a day. You can give instructions on when to open and close positions, and the systems will execute them automatically upon the occurrence of certain market situations.
Automated trading systems has risen to popularity in recent years. Reports suggest that about 80% of stocks bought and sold on US stock exchanges are managed by such systems.
It is no secret that your emotions can directly affect your trading behavior, imposing a devastating effect on your trading results. Emotions can potentially force traders to act out of character especially when the markets are volatile.
Automated trading systems can help reduce the impact of emotional trading. When your trades are executed automatically, you won’t have many chances to hesitate when making decisions.
When implementing automated trading systems, it is important to remember that your instructions have to be written in a programming language supported by your chosen broker. For example, you have to use NinjaScript when trading with NinjaTrader. If you are trading with TradeStation, remember to stick with EasyLangauge.
Advantages of Automated Trading Systems
Automated trading systems are popular because of the enticing benefits they can bring traders. Let’s have a quick look at a few of these advantages:
The ability to stay in the market 24 hours a day
Do you feel like you spend too much time in front of your computer monitor and it’s starting to take a toll on your life? Are you constantly fighting feelings of fatigue and sleepiness, trying to get more work done? You do not allow yourself to rest fully, thinking about the fact that you risk missing a profitable deal?
If you feel like you’ve been spending too much time trading in front of your computer, algorithmic trading is perhaps the solution for you.
While excessive trading can take a toll on your health and personal life, automation software can help you manage your trades when you take a break from the screen. You can stay active on the market 24 hours a day without sacrificing your life outside trading.
Minimizing Emotional Trading
Emotional trading is known for its detrimental effects on your potential profits. Many people start to open trades recklessly just because the market has taken their money thanks to their mistakes.
The desire to recover losses provokes irrationality, causing the trader to make reckless decisions that may further increase their losses.
The most destructive emotions for traders are fear, greed and bias. Greed causes the trader to hold a position longer than necessary due to a desire to make more money.
Fear has the opposite effect. preventing traders from profiting from a trade.
Automated trading systems are an effective way to suppress emotional trading because they are guided not by emotions but algorithms. Hence, it minimizes trading errors resulting from irrationality.
Great opportunities for Forex beginners
Before entering the financial markets, traders need to study a lot of information. Algorithmic trading will give you more time for a gradual and detailed study of forex basics.
Automated trading systems allow even novice traders to make their first profit with little effort. They allow beginners to focus on market analysis, which is necessary for a good understanding of the specifics of trading.
Since automated trading does not require a trader’s active participation, it can be argued that profits made from algorithmic trading are a form of passive income.
Since automated trading systems are designed to optimize your trades, they are great for beginners who don’t have a well-developed strategy yet.
The ability to simultaneously control multiple currency pairs
Manually conducting a simultaneous analysis of several directions is extremely difficult and time-consuming. However with an automated Expert Advisor, you can monitor the fluctuations of several currency pairs at the same time.
Automatic search of favorable offers
Automated trading software functions through algorithms embedded in it. You only have to enter brief information about the conditions you prefer, and the software will automatically select the most profitable and lucrative trades for you. All you have to do is to check your balance.
The Availability of Backtesting
Another advantage of algorithmic trading is the ability to perform backtestings. The program will analyze the effectiveness of the trading system signals, and generate a financial result.
The program will guarantee the success of any transactions before you open the trade, protecting you from unjustified investments.
Disadvantages of Automated Trading Systems
Lack of incentive to study the financial markets
Traders using automated trading software may eventually lose the desire to thoroughly analyze the market and improve their trading skills, as the system does everything for them.
The need to constantly update the system
Financial markets are very dynamic. Strategies that were successful before may not bring the same results later on. If you do not monitor market fluctuations and adjust your automated trading system accordingly, you will be putting your money at huge risk as the algorithms will manage your trades using an outdated strategy.
That’s why it’s very important to continuously monitor the market so that you can catch the signals that imply losses. Algorithms are not capable of independently perfecting themselves based on new market conditions.
Good software is expensive. Its price is often much higher than your deposit in a trade. If you are not proficient in programming, you will have to hire a programmer to adjust your automated trading system for you.
Some traders go for comprehensive services offered by software providers that often charged per transaction. This option may not be suitable for beginners due to the high costs involved.
The Best Platforms for Automated Trading
The choices of automated trading platforms are endless. There will be a platform for you regardless of your goals and preferences.
We recommend choosing automated trading systems that require minimal programming to keep your trading as simple as possible.
We also recommend platforms that allow you to test your trading systems without risking your money.
Pay attention to the tools that trading platforms offer. If you are just kickstarting your trading journey, go for platforms that are optimized for beginners and have the most popular, simplest tools for market analysis.
As mentioned earlier, MetaTrader 5 is perfect for testing automated trading systems. You can gain access to MetaTrader with exness sign up page, after this step you can download, install and use it for free.
With this platform, you can easily create your own algorithms. Importing Expert Advisors in this platform is incredibly easy.
In a few simple steps, you will be able to set the necessary parameters, and your automated trading system will look for favorable opportunities based on those parameters.
You can choose to have your automated trading system notify you of a trade opportunity, or automatically execute it without your intervention.
API is another platform that helps you code algorithms and create your systems from scratch. Thanks to its advanced IG technology, API users can enjoy excellent order executions.
With API, you can effortlessly view quotes online as well as analyze price movements of previous periods. You can also observe and analyze traders’ sentiments, which are very valuable for making trading decisions.
With this platform, you can use leading tools to automate your trading and create either simple or complex trading strategies tailored for professional traders.
You do not need any knowledge in programming. Each ProRealTime user has access to a wide range of tools that can be used to test their trading systems.
There are more than 100 different indicators available on ProRealTime, which can be used to create trading systems of various levels of complexity.
ProRealTime is not initially free. But if you trade at least four times a month, you can gain access to the system’s features without having to pay for them.
Automated trading systems are a great help to traders. They allow you to spend less time in front of a computer and neutralize emotions that lead to unreasonable and impulsive decisions.
However, it is vital to understand that no automated trading systems can trade for you and guarantee profits without your participation.
These systems require corrections by traders, or else you will be exposure to increased losses.
Even with the help of automated trading systems, you still need to understand the basics of trading and make careful and timely decisions.