What is an automated trading system? Is it beneficial in Forex trading? Automated trading systems are also called algorithmic trading, mechanical trading, system trading, and mechanical trading systems. It permits traders to have specific rules that should be followed for entry and exit points. Once the trader programs these rules, they will be automatically executed by the system. Automated trading is greatly loved by traders. As a matter of fact, about 70 t0 80 percent of shares being traded in the U.S are coming from automatic trading systems.
How To Establish Trading Rules in Automatic trading?
There are trading platforms like MetaTrader 4 that have strategy-building wizards which allow the user to choose from an array of available technical indicators that they can use in building a set of rules for automatic trading. The user might establish that a long-term position should be entered if the 50-day moving average can cross above 200 days within a 5-minute chart out of a specific trading instrument. Traders are also required to put on their different order types and when the trade gets triggered or defaults to your trading platform.
There is also a choice to use custom strategies and indicators. Traders who want this will be working closely with a programmer who can develop a system for them. This will require effort and more money but it will be all worth it since the degree of flexibility will be met and you will find the long-term results so rewarding.
After establishing the rules, the computer will now start to monitor the market for any buy or sell opportunities according to the trading strategy. Based on the rules that you have set, the trade will be entered and risk management tools like trailing stops and stop losses will be activated. The trader’s profit targets will then be generated.
Advantages of Automated Trading Systems
You will be amazed to know about the long list of advantages and trading opportunities that are offered to traders who utilize automated trading systems.
It Keeps Human Emotions At Bay
When trading, you will most likely have a surge of emotions. That is human nature. But with the use of automated trading systems, you can minimize the emotions involved in trading and you can also keep your emotions in check all the time. This is the perfect way to stick to your trading plan and follow your goals.
It Improves Discipline
Trade rules ought to be followed but humans are sometimes undisciplined and change their minds from time to time. With automated trading platforms in MetaTrader 4, discipline is highly preserved especially in volatile markets. One of the reasons for the loss of discipline can be attributed to emotional factors like the fear of losing or the desire to earn more.
It Improves Order Entry Speed
Computers are fast. They respond immediately to different market conditions. With automated trading systems, you are able to generate an order as soon as your trading criteria are met. You can get in and out of the trade within minutes.