Nicholas Maithya Nicholas is a financial analyst by profession with extensive experience in investment research and stock market analysis. His analysis has been featured on some of the leading investment research sites like Seeking Alpha and Benzinga. Nicholas has a solid knowledge of both the U.S and European markets having done several stock analysis over the last three years. His investment style is focused on undervalued plays and growth stocks. As a trader, Nicholas classifies himself as a swing trader and likes to trade GBP/USD, Gold and FTSE 100, among other liquid instruments.

Why Traders Should Consider Using Automated Trading Systems

2 min read

Over the years, Forex Trading has revolutionized from the traditional manual trading to automated trading systems, where analysts and traders code programs that automatically execute their trades.

Trading platforms range in number, and over the years, traders have effectively used them to trade different instruments online including commodities, metals, currency pairs and stocks. However, there are several positives emanating from automated system trading.

Some years ago, traders would only buy stocks direct from the exchange itself but nowadays, it is possible to buy stocks online and make significant profits within a few hours, days or weeks.

Now, in the recent past, some software developers have even taken the game further by developing automated trading systems, ones that allow traders to open and close trades without pressing a button. All they need to do is apply a code based on their trading rules and strategies, which then can pick trades for them and execute according to instructions.

 
This new method of trading has enabled several traders to join the world of online stock trading and helped in giving a chance to those who do not have the financial muscle to participate in exchange based investing (where investors buy stocks and own them before cashing on them). In general, automated trading systems have significant benefits to traders and most of them are taking advantage of this unique opportunity.

  1. Buy expensive stocks and apply shorting strategies

With online trading systems, traders can trade stocks that they could otherwise find expensive to own like Apple, and Google.

Additionally, they can also cash on their trades within a short period. Online stock trading has also allowed traders to apply shorting strategies on stocks that would otherwise require a huge margin in exchange based investing.

  1. Take emotion out of the game

One of the biggest benefits of using automated trading systems is the ability to take emotional trading out of the equation. With a trading system, it is hard for traders to find themselves making decisions that are solely based on emotion.

In other words, we all know that the global financial markets will always remain volatile regardless of the prevailing economic conditions.

Therefore, using a rules-based system to execute trading decisions can spare traders a lot of trouble during times of uncertainty.

  1. Helps in implementing strategy

Automated trading is one of the best ways of implementing a trading strategy. Some traders prefer to trade within a particular strategy as a way of making consistent returns.

With pre-coded trading programs, it is quite easy to stick to your trading strategy and continue minimizing the risk of loss, while at the same time capitalizing on low risk opportunities. It all depends on your strategy.

Additionally, automated trading helps you in assessing the market from an objective point, because your goal is not entirely based on current events, but what you perceive could happen in the future. Therefore, using an automated trading system where you are able to generate trading rules and forecasts can be very handy, especially during times when markets appear least predictable.

  1. It can afford you time to do other businesses

Automated trading allows traders to conduct other businesses without worrying about their open trades. Once you have put down your trading rules and goals, trades can close by themselves whether you are asleep or at work.

This type of trading has been associated with part-time traders for years, as they only spare a small amount of time for their trading activities. This is when they take an overview of their trading rules and strategies and compare it with the market to see whether they are still within the game.

Note that, sometimes the price of the underlying security or currency pair might slip or rise well beyond your trading rule limits, thereby limiting your potential for profits. This is why volatile market conditions provide the ideal opportunity for automated trading strategies.

Conclusion

As discussed, it is quite clear that trading systems could be an important part of a trading strategy for any trader, especially to those who prefer minimum direct interaction with the market.

Traders can either choose to download the program and install it in their computer or trade stocks and other instruments directly from an online platform.

There are several platforms that traders use including FXCM, MT4 and Trade Station, which are some of the most popular ones.

Additionally, there are also those that provide traders with the opportunity to come up with their own trading rules upon which, they can implement their trading strategies.

Nicholas Maithya Nicholas is a financial analyst by profession with extensive experience in investment research and stock market analysis. His analysis has been featured on some of the leading investment research sites like Seeking Alpha and Benzinga. Nicholas has a solid knowledge of both the U.S and European markets having done several stock analysis over the last three years. His investment style is focused on undervalued plays and growth stocks. As a trader, Nicholas classifies himself as a swing trader and likes to trade GBP/USD, Gold and FTSE 100, among other liquid instruments.

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9 Replies to “Why Traders Should Consider Using Automated Trading Systems”

  1. An extract form this website http://online-stock-trading-review.toptenreviews.com/all-about-automated-trading-systems.html Is this possible in India.
    “As an investor, you subscribe to an automated trading service and fund your account, but because everything is automated, you don’t need to spend a lot of time reviewing how the system is working. If you discover over time that you don’t like a particular service, you can unsubscribe and move on to another one.

    It’s fairly simple to get started with automated trading. There are many stock trading services to choose from, and when you sign up with one, you typically set up a strategy for trading stocks, options and even foreign currency. Once you’ve reviewed and settled on a trading strategy, you open your account with an online broker or sync your automated trading account with an existing brokerage account.

    Once you’ve funded your account for automated trading, the system takes over and executes the strategy you’ve chosen. Since this type of trading is based on algorithms and statistical data, your account will buy or sell the securities or other holdings you’ve chosen for your strategy as the market moves and crosses certain statistical barriers. Initially, you can track how your strategic trading is going; if you’re happy with its performance, you can continue to maintain the account.

    Fortunately, you’re not locked in to your strategic picks. If a security isn’t performing up to your expectations, you can intervene and stop trading to prevent losses. You can also liquidate and delete positions altogether if you determine a security should not be part of your trading strategy or portfolio”
    Is this possible in India who is providing it such simplicity.”

      1. Dear Raj,

        Can you tell me best combination of indicators to develop robo/auto trading(along with trailing stoploss)_

  2. sir;
    my brother is in Dubai & is going to open an FOREX trading a/c with ALPARI in Dubai , so can i trade on his a/c in FOREX from mumbai ?Is it legal ?

  3. Dear Prasanna,

    it is not legal to trade in comex from India if you don’t own visa for that country or you have your office there.

  4. is it better to use zerodha pi for auto trading or amibroker strategies to link nest and do robo trading ?

    1. it all depends on your need as well as affordability. it will be better if you get a good strategy first ,afterwords you can choose a platform. lots of ways to automate your AFL.

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