AUTOMATED TRADING: How It Works & Best Platforms In 2023

automated trading
Image source: MoneyMiniBlog

What if I told you that you could control your trade without being totally involved? And no, I’m not talking about handing over to a professional. I’m talking about using an automated trading platform or software that allows you to yield profits in multiple crypto and forex trades quickly. Want to know how this works? Read on. 

What Is Automated Trading?

Automated trading is a form of trading in financial markets that use a program that follows pre-programmed rules for entering and terminating trades. As the trader, you will combine in-depth technical analysis with establishing position characteristics such as orders to open, trailing stops, and guaranteed stops.

Auto trading allows you to execute multiple trades quickly while removing emotion from your trading decisions. This is because the trade rules are already embedded in your selected parameters. You can even utilize your pre-determined techniques to follow trends and trade accordingly with some algorithms.

How Does Automated Trading Work?

First, you will choose a trading platform and define the parameters of your trading plan. You’ll utilize your trading knowledge to develop a set of rules and conditions, which your bespoke algorithm will use to place trades on your behalf. These elements often depend on the trade’s time, the price at which it should be opened and closed, and the quantity. 

The defined auto trading method will monitor financial market prices constantly, and deals will be completed automatically if predetermined parameters are matched. The goal is to execute trades more quickly and efficiently and capitalize on specific, technical market events.

Who Uses Automated Trading?

Institutional investors and large brokerage firms mostly utilize automated trading to reduce trading expenses. According to studies, algorithmic trading is especially advantageous for big order sizes, which can account for up to 10% of total trading activity.

Advantages Of Automated Trading

  • Maintains discipline and reduces the impact of emotions in trading.
  • It saves time and can be accommodated to each trader’s timetable.
  • Allows investors to investigate various market opportunities and methods without risking human exhaustion.
  • Improves order execution by allowing trades to be made and exited at optimal prices, maximizing profits, and limiting losses.

Disadvantages Of Automated Trading

  • There may be an over-reliance on technology and the automated trading system, and mechanical faults can be disastrous.
  • There is a risk of over-optimization, with investors creating a method that looks good on paper but is unsuitable for live trading.
  • It may be necessary to monitor frequently to identify potential threats such as connectivity issues and system failure.

Automated Forex Trading

Automated forex trading algorithms, often known as algorithmic trading, black-box trading, Robo or robot trading, have numerous benefits. It is intended to operate without the trader’s presence by scanning the market for successful currency deals using either pre-set parameters or parameters programmed into the system by the user.

In other words, using automated software, you may turn on your computer, launch the program, and then walk away while the software trades for you.

What Is the Process of Automated Forex Trading?

The program that runs automated forex trading software analyzes currency price charts and other market activities over several timeframes. The software identifies signs such as spread differences, price movements, and market news to discover potentially successful currency pair transactions.

The Benefits of Automated Forex Trading

The absence of emotional and psychological elements influencing your trading decisions in favor of a cool, rational approach to the market is a significant advantage of automated forex trading software. Beginners and even professional traders may occasionally make a deal based on a psychological trigger that violates market logic. Such all-too-human mistakes in judgment do not exist in automatic trading.

This is because automated software is designed to make unemotional and consistent trading judgments based on the criteria you’ve pre-established or the settings you’ve pre-installed.

Automated Crypto Trading

There are numerous misconceptions about automated crypto trading. Some people believe it’s magic, while others say it’s a hoax.

Time does not wait for anyone, and the financial markets are no different. Keeping up with the fast-paced swings in pricing is critical to success, especially in the unexplored realm of cryptocurrency trading. Various cryptocurrencies, a few viable trading methods, and myriad tools available to beginner traders can all be perplexing.

Fortunately, technological advancements have enabled the automation of numerous trading operations, including market analysis, trend prediction, and order execution. This frees up time for strategic planning and lays the groundwork for long-term cryptocurrency trading success.

What is Automated Crypto Trading?

The technique of utilizing computer programs (crypto trading bots) to buy and sell digital currencies on one’s behalf is known as automated crypto trading, also known as automated cryptocurrency trading. These software applications are designed to react to market developments to trade at the best possible time. Furthermore, automated crypto trading eliminates the unpredictability and emotion that comes with manually buying and selling cryptocurrency.

The fact that bots can work continually without rest is one of the numerous advantages of automated cryptocurrency trading over manual trading. They are also emotion-free, so they will always stick to their game plan and follow any new market trend or event as soon as it occurs.

Steps In Automated Crypto Trading

In general, automated crypto trading involves four steps: data analysis, signal generation, risk allocation, and execution

#1. Data analysis

Data is vital for success in a technology-driven society, which is why a crypto trading bot needs data analysis. Machine learning-enabled software can outperform humans in data mining activities. 

#2. Signal generation

Once the data has been analyzed, a bot will conduct the work of a trader by anticipating market trends and finding potential trades based on market data and technical analysis indicators.

#3. Risk allocation

The risk allocation function determines how the bot distributes risk across multiple investments based on the trader’s predetermined criteria. When trading, these rules often outline how and what percentage of funds will be invested.

#4. Execution

Execution is the process by which bitcoins are bought and sold in response to signals from the pre-activated trading system. During this time, the signals will generate buy or sell orders, which will be sent to the exchange via its API.

Is Crypto Automated Trading Profitable?

Manual trading is less prevalent, despite popular belief. Indeed, algorithmic trading bots have taken over the financial industry to the point where algorithms control most of Wall Street activity. Bots are not an only trading cryptocurrency; nearly everything, including equities, bonds, and foreign exchange, is now purchased and sold using algorithms.

The primary reason for this transition is straightforward: Bots can make decisions faster than humans. They are also not influenced by emotions, which allows them to stick to their trading plan even when markets are volatile.

Remember that crypto trading bots are not ideal and cannot eliminate all dangers. However, they can automate trading methods to assist new and expert traders in making a profit. To correctly configure a bot, you must first comprehend the market and the regulations and instruments related with trading.

Advantages And Disadvantages Of Automated Crypto Trading

Those that use automatic crypto trading benefit from several advantages. Here are some of the most significant advantages of automatic trading.

#1. Emotional Control

By automatically executing deals after the set trade parameters are met, automated crypto trading systems help to control emotions. Traders will not hesitate or second-guess their judgments in this manner. Crypto trading bots aren’t just for nervous traders; they can also assist people who are prone to overtrading by buying and selling at every chance.

#2. Backtesting

Backtesting automated trading systems with past data can produce simulated results. This procedure allows for the refinement and improvement of a trading strategy prior to its implementation. When developing an automated trading system, all rules must be concrete, leaving no room for bias.

The computer cannot make assumptions and must be given specific instructions. Traders can evaluate these settings against historical data before putting money at risk. Backtesting is a way of experimenting with trading ideas and calculating the system’s expectancy, which is the average amount of profit (or loss) a trader can expect for each unit of risk.

#3. Maintaining discipline

Getting caught up in a market rally and making rash decisions is easy. Even in rough market conditions, traders can take a systematic approach to trading by adhering to the trading rules established by their strategy. Following these criteria, traders can avoid costly blunders like chasing losses or entering trades without a solid plan.

#4. Enhancing order entry speed

Trading bots in cryptocurrency can watch the market and execute deals faster than humans. They can also respond to market movements far faster than humans. In a volatile market like Bitcoin, getting in or out of a deal a few seconds earlier can have a big impact on the trade’s outcome.

#5. Trading diversification

Crypto bots enable users to trade many accounts or strategies simultaneously. Traders can lessen the probability of loss by diversifying their portfolios by investing in a number of assets. What would be extremely difficult for a human to accomplish is accomplished in milliseconds by a computer. Automated crypto trading systems are meant to take advantage of any profitable trading opportunities.

Diadvantages

Although automated crypto trading has numerous advantages, there are several disadvantages to the practice, which include.

#1. Expensive start-up costs

Skills and time are required when building an automated trading system from the ground up. Not to mention that these early costs may offset any improvements made by the system. Furthermore, to keep the system working effectively, operational fees such as hosting and virtual private server (VPS) services must be paid on a monthly basis.

#2. Costs of ongoing maintenance

Automated trading systems must be regularly checked for issues such as network failures, software upgrades, and unexpected market events that may impair trade execution. These costs may add up over time and reduce profitability.

#3. Lack of adaptability

Crypto trading bots are designed to adhere to a set of rules and cannot react to changing market conditions. This rigidity may lead to missed opportunities or poor trades.

#4. Mechanical breakdown

Like any other system, an automated crypto trading system might experience technical issues such as network outages, power outages, and data feed mistakes. These errors could result in an order being placed at the wrong price or quantity, resulting in a loss.

Is Automated Crypto Trading Secure?

The safety of automated crypto trading is determined by the system’s architecture and the frequency with which trades are checked. They cannot be set and abandoned, expecting them to handle market volatility and protect traders from losses precisely. Nevertheless, they may be a dependable instrument that can ease bitcoin trading travels by improving operations and permitting hassle-free trading 24 hours a day, seven days a week. They assist prevent bad decisions involving money loss owing to human error or vice versa because they are inherently dispassionate.

Automated Trading Platforms

You can mirror or mimic the transactions of other, sometimes more experienced traders using automated trading platforms. This allows you to automate your trading and trade even if you are a complete newbie. It is an excellent approach for more sophisticated traders to avoid sitting and watching their screens all day. Here are some automated trading platforms for you:

#1. Duplitrade

DupliTrade is an automated trading platform with an MT4-compatible tool that allows traders to automatically follow the signals and strategies of more experienced traders in real time. Its user-friendly design makes creating and managing a trading portfolio simple while learning about effective trading tactics.

#2. ZuluTrade

ZuluTrade, one of the most popular automated trading platforms today, transforms professional traders’ suggestions and automatically executes transactions in your AvaTrade account. Choose which program or expertise best suits your objectives and investor profile.

#3. AvaSocial

AvaSocial is also among the best automated trading platforms you can use. It is all about social trading among members of the AvaTrade community. The social trading app cuts the learning curve in half. This focuses on copy trading, where you may find mentors, ask questions, and imitate their moves. By learning from the greatest, you can replicate their results in your own portfolio.

Automated Trading Software

Traders can use automated trading software to automate their transactions by setting various parameters for potential deals, allocating capital, and even starting and closing positions without requiring human participation.

Automated trading analyzes markets and evaluates stocks to see whether they fit the criteria for making trades using sophisticated algorithms.

Without the need for a broker, automated trading software enables traders to monitor and analyze more stocks than is humanly possible, as well as to execute trades in a fraction of a second, optimizing profits and achieving efficiency.

Traders and investors can program computers to execute and monitor trades based on the exact entry, exit, and personal finance guidelines. One of the most appealing aspects of strategy automation is its ability to remove some of the emotion from trading by automatically executing trades when certain conditions are satisfied.

Best Automated Trading Software In 2023

  • MetaTrader 4
  • Interactive Brokers API / FIX CTCI
  • Zen Trading Techniques
  • WunderBit
  • Botsfolio 
  • Trality
  • Coinrule
  • Pionex
  • Forex.com
  • NinjaTrader 

Can You Make Money With Automated Trading?

You can make money with automated trading, but most traders fail to make money like any other form of trading.

In Conclusion,

Whether you are a newbie, experienced, or seasoned trader, automated trading software can help you succeed.

There are always risks while trading in any market, but automation tools can help you prevent significant losses. Most essential, create a checklist of the most critical features you’re searching for in a program and the level of customer service. Remember, no trading system can promise 100% winning trades, and past success is no guarantee of future results.

  1. Trading Bots: Ultimate Guide to the Top 15+ Crypto Trading Bots (Free & Paid)
  2. HOW TO DAY TRADE: Complete Guide to Day Trading for Beginners
  3. Stock Trading Business: How to Start a Stock Trading Business
  4. Why Banks Are Now Into Crypto Exchange
  5. HOW TO BECOME A DAY TRADER: Step-by-Step Guide

References

0 Shares:
Leave a Reply

Your email address will not be published.

You May Also Like