Investors and traders are capable of turning precise exit, entry and management rules on money into various auto trading systems. This allows the computers to be used in monitoring and executing various trades. One of the most beautiful aspects of these automated strategies is that they are able to make a distinct difference of the emotions totally from trading. This is because the trades are placed automatically once all criteria are met. Readers will learn more about what auto trading software is all about below.
Also referred to as an automated trading system, algorithmic trading or mechanical trading systems, they allow the traders to initiate specific rules that are going to be used for both trade exits and entries. When these rules are programmed, it can automatically be executed through the use of a computer. The trade exit and entry rules are based on elementary conditions like the moving average crossover. It can also be a very complicated one where it requires a thorough knowledge of the programming language that is specific to the trading platform of the user or it can also be based on the expertise presented by a qualified programmer. The typical requirements of an automated trading system is that the use of it should be connected to a direct access broker. Any of the specific rules should be written in the proprietary language of the platform. An example of this would be the TradeStation platform, wherein it utilizes the EasyLanguage as a programming language for it. On another hand is the NinjaTrader platform, makes use of the NinjaScript language.
There are definitely a lot of benefits, which include the following:
Backtest Ability – When a system is designed for the purpose of auto trading, all the rules in it should be absolute and there should be no room for interpretation. You all know that the computer does not make any guesses since it should be told exactly what it needs to do. The traders can utilize these sets of rules and then test them out on the historical date prior to risking any money during live trading. Backtesting is applied in trading rules in historical data in order to identify the viability of a certain idea. By using careful backtesting, it will allow the traders in evaluating and then improve the idea and also in determining the expectancy of the system. This means the average amount that the trader expects to lose or win per unit of risk.
Preservation of discipline – this sounds a bit off coming from a software, however there are trade rules that need to be established in a system. This is why discipline should be preserved even when exposed in volatile markets. There are times that it gets lost because of the emotional factors like the fear of getting a loss or even the desire to eke out a bit more profit from the trade. Automated trading actually aids in ensuring that the discipline is thoroughly maintained since the trading plan is to be followed to the dot.
There are more benefits to using automated trading software, but be advised that it also comes with its own drawbacks.