Automated trading is a subset of algorithmic trading. It uses a computer program with the aim to create buy and sell orders and submit them automatically to a market center or exchange. The computer system automatically generates orders on the basis of the predefined set of rules with the help of trading strategy based on technical analysis, innovative statistical and mathematical computations.
In general, automated trading system is used with electronic trading, including electronic communication networks, dark pools, and automated exchanges. It can execute repetitive tasks at speeds orders of magnitude. As traditional risk controls and safeguards are not reliable for automated trading, new controls like trading curbs have been designed to deal with the automated trading system.
Undoubtedly, there are different types of automated trading systems available, but there are a few questions that need to be answered.
What is an automated trading system? What is automated trading? Is a profitable system? What are the advantages of automated trading? Are they safe? If any of these questions come across your mind, you will find answers here:
What is Automated Trading System?
As discussed earlier, it is a program that allows traders to set rules for entering as well as exiting trades. Investors and forex traders decide exact entry, exit, and money management rules into automated Forex trading systems that allow computers to perform and monitor trades. When the programming of rules gets completed, their computer can automatically carry out trades as per those set of rules.
EAs and Forex Robots
Automated trading systems are divided into two categories, including Expert Advisors (EAs) and Forex robots.
As the name suggests, EAs are skilled and experienced professionals who write algorithms in order to analyze market trends and perform the process of trading. Forex robot, on the other hand, is a software program designed to analyze the market and trade on behalf of traders.
Advantages
Minimize emotion: As orders are placed automatically, emotional mistakes are eliminated. It helps investors to stay disciplined when the market is highly volatile.
Backtest: Before using the system, traders can evaluate their rules using the old data. It also allows them to minimize mistakes and determine the expected returns.
Maintain consistency: With the help of an automated trading system, traders can maintain consistency.
Improve speed: It helps in achieving higher-order entry speed that is beneficial in the current market.
Diversity: It allows users to trade in different accounts which allow them to diversify their portfolio. It will reduce the risks by spreading the risk over several instruments.
Are you a dedicated investor interested in trading? Keep these advantages in mind and make decisions accordingly.
Pooja is a professional content writter who loves to write about anything that is directly or remotely connected with technology and day today life style. From hardcore tech stories to the overall influence of technology in life, Pooja is passionate about all things internet.