As investment opportunities continue to attract people around the globe, trading tools have consistently evolved over time, making it easier for beginner and advanced traders to keep their finger on the pulse of financial markets around the world.
Automated trading systems are one of these tools. Created to help traders take advantage of investment opportunities at all times, automated trading systems (ATS) are computer programs that create orders and automatically submit them to market exchanges. More specifically, traders are able to pre-set specific rules that the computer program will then execute automatically. These rules can be based on simple indicators or more advanced strategies, depending on one's personal trading skills and knowledge. Once the rules have been determined, the program monitors the markets for potential opportunities.
Emotional trading
One of the great advantages of automatic trading is the fact that it minimizes the potential for emotional trading, while promoting discipline. Indeed, once the program is set, traders are less likely to react erratically to market movements and make unfortunate mistakes. Given the highly fast-paced nature of global financial markets, it is essential that traders cultivate discipline and calm throughout their activities and auto-trading can help improve such qualities as high speed order entries can transform a potentially catastrophic loss into a much smaller one. Backtesting is also one of the main reasons why more an more traders turn to auto-trading, as it allows them to experiment with a specific set of rules before risking their own capital. This, in addition to the fact that ATS users are able to trade with various strategies at the same time.
Trade with caution
Auto-trading must be approached with caution however, as it is seen as an important contributor to market fragility. Regulators have frequently discussed the possibility of implementing risk-control systems to limit potential disruptions induced by automatic trading. Such disruptions can include incorrect order entries due to computer malfunctions or human error, the violation of certain regulatory requirements or exceeding capital limits. One notable example occurred on May 6, 2010, when the Dow Jones Industrial Average dropped about 1,000 points before rebounding within minutes. Otherwise known as the 2010 Flash Crash, this disruption prompted U.S. regulators to implement new regulations aimed at controlling automated trading market access. It is also important to note that, while they do offer traders the freedom to go about their day while the computer executes their trades, auto-trading systems require consistent monitoring. Connectivity issues, power losses or computer crashes can lead to severe errors, but if traders remember to keep their eye on the game, potential complications can quickly be identified and resolved.
Copy trades of expert traders
Get to know Forex brokers websites and the automated trading platforms they provide. For example, AvaTrade UK offer traders with very little experience to trade on a wide range of underlying financial instruments in a secure environment. In one simple click, registered account holders can copy the strategies, signals and trades of other successful traders, thanks to its highly-appreciated Mirror Trader. Another popular auto-trading algorithm that you can find in AvaTrade, called RoboX, allows traders to apply over 100 million trading strategies. Easy to use, this state-of-the-art trading tool adapts to each client's needs through a series of questions, allowing it to determine each trader's unique objectives.
In conclusion, though trading should always be performed with caution and in an informed manner, automated trading has become an essential tool for traders of all levels. With the help of AvaTrade, auto-trading can become the next step toward a profitable trading experience.
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