Trading systems are rules based on analysis that tell a trader when to trade and how to trade. It is like a blueprint for the trader to follow. Without it, one cannot remain invariably profitable in the long run. There are two kinds of stock market trading systems: discretionary and mechanical trading systems (automated trading systems).
What Are Automated Trading Systems?
An automated trading system (algorithmic or mechanical trading system) is a kind of trading system where the trader can set rules for trade entry and exits. Once the rules are programmed, they are automatically executed using a computer.
In other words, the whole trading is monitored and managed by the computer. The system requires software connected to a direct access broker with the rules written in the platform’s propriety language.
These days, automated trading systems are popular among stock traders, unlike discretionary trading systems. In discretionary trading systems, the trading rules are not specific. It is based on a mixture of rules.
Automated trading systems can make you a profitable trader. Here is how:
5 Ways to Be Profitable With Automated Trading Systems
Zero-To-None Emotions Attached
One factor that inhibits profit in stock trading is emotion. Greed and fear. Fear of losing money and greed to want to invest more without considering the risk. Automated trading systems are “automated”. In other words, computer-controlled. It makes you a profitable trader by eliminating greed and fear such that emotions are not attached to trade. You only need to set the rules and let the system trade for you.
Historical Market Data
Another way automated trading systems can make you a profitable trader is with historical market data or backtesting. It is a method of seeing how feasible a strategy is by using historical data to play it out. Traders can evaluate a strategy to determine profit or loss per unit risk (system’s expectancy). Think of it as a test running your trading strategy.
Putting your eggs in several baskets is one way to minimize risks. Hence, trade diversification. Some automated trading systems allow a trade to simultaneously several accounts using several strategies. The risks are spread, and hedges are created against loss. Hence, profit is made.
Originally, diversifying trade was not easy to accomplish, but automated trading systems have made it easy.
Maintaining Trading Discipline
Automated trading systems, unlike humans, don’t get fatigued. It runs trading strategies as long as the market is open. This is advantageous for certain stocks. You can have strategies for trading at various sessions in the same market.
Also, the system hardly ever makes mistakes, unlike discretionary trading. You don’t need to stay glued to the computer’s screen. The system runs everything. You don’t need to concern yourself about it. Timely orders are placed when they should, without hiccups.
Optimized Speed for Order Entry
Automated trading systems are designed to respond immediately to changing market situations. Orders are generated immediately after the set criteria are met. Getting into a trade or leaving it seconds earlier makes in difference to the trader’s outcome.
If you want an automated trading strategy, Algorithmic Futures is a good recommendation. Algorithmic Futures offer fully automated trading systems to make you a profitable trader in no time.
Disclaimer: This article is not intended to be a recommendation. The author is not responsible for any resulting actions of the company during your trading/investing experience.
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