Is not it better to have a robot that trades for you and get guaranteed profits? Many people dream of finding an automated trading system, perfect for automated trading, which guarantees a profit and requires little information from the traders themselves.
Although there are many automated trading systems available, there are a number of questions that need to be answered.
Therefore, I will try to explain why we should consider automated trading.
Step 1 : What Is Automated Trading System?
Automated trading systems, or automated trading, allow traders to define particular rules for transaction entries and exits that can be automatically executed by a computer.
The rules of entry and exit in the trade can be based on simple conditions, such as a moving average crossing (MA), or on sophisticated strategies requiring a complete understanding of the programming language specific to the platform of the user’s trade.
It is commonly observed that people involved in trading do not really have much knowledge about the trading process. Not surprisingly, this is one of the reasons why automated trading systems are so popular.
For those who want to start trading, a computer with an internet connection is enough: you do not even need a big investment to start. Automated trading tools allow traders, especially beginners, to set their trading limits in advance, allowing them to stay on track.
On the other hand, manual trading can increase the risk that they are emotionally invested in a transaction and not make the best trading decisions.
The consultants (EA) are an example of an automated trading system on Forex. Environmental assessments are created by highly skilled and experienced professionals who write algorithms to analyze market trends and execute the negotiation process on behalf of operators.
These professionals are chosen according to their level of knowledge and achievements. The advantage of using an EA is that a client trader can avoid panic or anxiety in their operations.
Step 2 : Automated Trading on Automated Forex and Forex Systems
Forex traders and investors can transform the exact rules of entry, exit and money management into automated Forex trading systems that allow computers to perform and monitor trades.
One of the key benefits of automating the strategy is that it eliminates all the negative or destructive emotions inherent in the transactions because they are automatically placed as soon as certain criteria are met.
In other words, the trading software or Forex robot that you choose runs all the trading processes, then opens and closes the transactions while you sit and relax.
Step 3 : Is Automated Forex Trading System Profitable?
Forex automated trading systems do not guarantee 100% profits, but they guarantee that you will make the most of market movements. Auto Forex trading systems work in a very articulate and consistent way. Expert advisors are basically programs that include certain modules that study charts and numbers, which move between a broker and a Forex broker.
These specially designed programs are extremely easy to handle and use. You do not need any prior training. Just download the program, install it and adjust the settings on your computer. The automated currency trading system will then begin to work and generate immediate results.
Step 4 : The Benefits of Trading and Automated Systems
Automatic trading minimizes the impact of the emotions involved in the trading process. By controlling their emotions, traders usually find it easier to stick to their main plan.
Since transaction orders are automatically executed as soon as the transaction rules are respected, traders will not be able to hesitate or question the transaction. In addition, automated trading can prevent excessive trading (ie, buy and sell each time it is collected).
The next advantage is the backtest capability. Backtesting applies trading rules to historical market data to define the viability of the idea.
When developing a system for automated trading, all rules must be absolute, with no possibility of interpretation (a computer must do exactly what it should do without guessing).
In addition, traders can use these rules and test them against historical data before risking money during live trading sessions.
Careful backtesting allows traders to evaluate and refine a trading idea, as well as identify system expectations – the average amount a trader can expect to earn (or even lose) per unit of risk .
Automobile trade also preserves discipline. When the management rules are defined and the execution of the transaction carried out automatically, the discipline is preserved even in unstable markets.
Discipline is often lost due to emotional factors such as the fear of losing or the desire to gain a little more profit from an exchange. Automated trading helps maintain discipline because the trading plan will be followed precisely.
In addition, the driving error is reduced. For example, a purchase order of 100 lots will not be entered by mistake as a sales order of 1,000 lots accordingly.
It would be a mistake not to mention that automated trading helps to achieve consistency. One of the biggest challenges of trading is to plan the next move. Even if a business plan has the potential to be profitable enough, operators who do not comply with the rules change the expectations of the system.
You have to understand that there is no business plan that wins 100% of the time – losses are always part of the game. However, losses that can be damaging psychologically, a trader who has two or three trades lost from may decide not to proceed to the next trade.
The next exchange could have been successful, so the trader has already ruined the expectations of the system. Automated systems allow operators to achieve consistency.
Another benefit is improved order entry speed. With computers instantly responding to changing market conditions, automated systems are able to generate orders once the exchange criteria are met.
As a result, entering or leaving a trade a few seconds earlier can make a big difference in the trading results. Once a position is entered, all other commands are automatically created, including protection against losses and objectives.
You know that markets can evolve quickly and it is demoralizing to make a transaction reach the profit target or exceed the stop-loss threshold before placing orders.
Finally, the last advantage is that you can diversify the exchanges. An automated trading platform allows the user to negotiate simultaneously with multiple accounts or with different strategies. In turn, this could potentially spread risk across different instruments, while offering protection against position loss.
The software is able to search for trading opportunities in different markets, create orders and monitor transactions.
Step 5 : The Disadvantages of Automated Trading and Systems
Despite the advantages, know that automated trading is not without drawbacks. The theory behind automatic trading is that it sounds pretty simple: install the software, program the rules and watch the trade.
However, reality does not always reflect anticipation. Automated trading is not foolproof. Depending on the trading platform, a trading order may actually reside on a computer and not on a server.
This implies that, if your internet connection is lost, an order may not be sent to the market. There could also be a difference between so-called hypothetical transactions generated by the strategy and the component of the order entry platform that transforms them into actual transactions.
The majority of traders should expect a learning curve when using automated trading systems. It is therefore wise to start with small transactions while the process is refined.
The second problem is surveillance. Although it is wonderful to turn on the computer and leave for the day, automated trading systems require monitoring. This is due to the possibility of mechanical failures, such as connectivity problems, computer failures or power outages and system problems.
An automated trading system may encounter anomalies that may result in missing orders, erroneous orders, or even duplicate orders. If the system is monitored, these events can be determined and resolved quickly.
And the last most obvious disadvantage is over optimization. While not specific to automated trading systems, traders who use backtest techniques can produce systems that look great on paper and work very well in a real market.
As a result, over-optimization refers to an over-adjustment of the curve, which generates an unreliable trading plan in live trading.
For example, it is possible to modify a strategy to obtain exceptional results according to the historical data on which it was tested.
Transactions sometimes incorrectly assume that a business plan must include 100% profitable transactions or must never be used to become a “workable plan”.
As such, the established parameters can be adjusted to create an “almost ideal” plan. However, they will generally fail once applied to a real market.
Although there are advantages and disadvantages of automated trading and everything depends on the proper use of technology. Sometimes, if your luck is bad, you will get technical malfunctions. But to win something, you have to take some risks.