Automated Trading: Strategies, Software, Algorithm, Platform

No matter your trading strategy, there are some parameters you must get right to become a profitable trader. Beyond correct analyses and prediction, a good trader must also master good timing, accuracy, and precision. This will help to get trades on time and maximize market movements.

However, it usually takes much time and effort to master these trading fundamentals and integrate them into a trading strategy. Unless you’re a full-time trader, you might not have the luxury of time to monitor the market all the time to execute trades. This is where automated trading comes in handy.

Here, let’s consider what automated trading means, the strategies you can use for automated trading, and the different systems that can help you implement automated trading.

What is Automated Trading?

Automated Trading is a kind of trading where a computer automatically makes trade decisions based on pre-installed algorithms. The algorithms are defined with predefined instructions to execute the trader’s strategy. In a nutshell, automated trading enables traders to automatically execute trades using computer software.

How Does Automated Trading Work?

Every strategy defines certain criteria that must be met under certain rules before a trade is executed. For instance, a trend strategy trader will always wait to confirm that a market movement is a trend before taking a trade.

So, the general idea behind automated trading is to program these rules into a computer and set the necessary parameters. Such parameters include the volume of the trade market price, etc. The software algorithm then executes trades with the parameters when the specified conditions are fulfilled.

Strategies For Automated Trading

As earlier mentioned, the strength of automated trading systems lies in the strategy it is set up to execute. There are different strategies common to automated trading, and each one executes trades based on the modalities of the programmed strategy. Some of the most common automated trading strategies include:

  • Trend Based Strategy

This strategy often makes use of technical analysis and indicators like moving averages to identify trends based on existing data. Then, it executes trades based on the prediction of whether or not the trend continues.

  • Arbitrage Strategy

This strategy seeks to maximize differences in securities prices in different exchanges. The automated trading system detects and purchases an item for a lower price on one exchange and sells for a higher exchange on another.

The strength of this strategy is the ability of the system to be fast and accurate and maximize high trade volumes for optimal profit even on little price differences.

  • Mean Reversion Strategy

People who use this strategy believe that prices must fluctuate but must return to a certain average point after a certain time.

So, the automated trading systems try to identify these “limits” and execute trades as soon as prices are off these points, waiting to take profit as price returns.

Best Platforms for Automated Trading

Many different trading platforms enable automated trading, with each providing both general and unique features for profitable trading. Below are some of the most popular and most effective.

  • MetaTrader 4
  • ProRealTime
  • AvaTrade
  • eToro
  • Learn2Trade

Conclusion

If you have developed a working strategy for your digital trading, automated trading systems can help you implement it. That way, you can minimize emotional instability during trades and make profits from trades without having to monitor them all the time.

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