Automated Trading Systems – The Way of the Future
Automated trading is a strategy, rather a system, which executes orders automatically on behalf of traders. It is known by various other names such as black box trading, mechanical trading and algorithmic trading. The purchase and sale of orders can be fully automated by setting parameters based on price fluctuations and technical indicators. It eliminates the emotional quotient from trades and allows traders to concentrate on improving trade strategies and money management rules.
These automated trading systems can operate multiple investment strategies including arbitrage, market-making, pure speculation or inter-market trading with a click of a mouse. They can also be used in diverse markets including Forex, options, futures and stocks. The trading system is automated, but it allows human intervention. One can operate it on “auto pilot” or choose to control investment and strategy decisions manually with algorithmic trading system support.
Automated Trading vs. Manual Trading – Which is a better trading model?
It is often difficult to choose between an automated system and a manual system. Some prefer the former over the latter because it has been tested by experienced traders. Quite on the contrary, many others opt to go down the manual route as they trust their own trading strategies. These strategies are devised on the basis of comprehensive market research. Knowledge of the advantages and disadvantages will enable you to make an informed decision.
Manual trading is a quick and easy way for a novice to get started but in most cases starting a new business to quickly can be very costly. It is simple to open a position in the market. In involves placing a deposit, selecting a currency pair, determining the direction of the market trend and setting the leverage level. When you set the leverage levels, you specify the stop loss and profit taking points. The manual model is a good pick for one who spends a considerable amount of time in market research.
On the other hand, an automated trading system is a good option for novice traders. It helps develop confidence and does not allow them to alter trade decisions as easily. It relies on proven and tested automated trading strategy. Experienced traders can also use automated systems to increase the efficiency and profitability of trades.
Automated trading systems are the new age employee at brokerage firms. The need for a room full of traders can now be done by a couple of computers setup to run multiple automated trading strategies.