Technological advancements have permeated all spheres of life including trading. Autotrading involves buying and selling orders that are placed automatically on an underlying program. You must adhere to the trade conditions in the underlying program for your order to be placed.
Once you satisfy a programmed strategy’s conditions, autotrading facilitates fast execution orders. Autotrading programs support almost all trading strategies that are programmable. You must run some profitability tests on your strategy before you try to program it.
What is Autotrading?
It is a trading system that involves buying and selling orders that are executed automatically depending on an underlying system or program. The trades are executed once the conditions of the program or underlying system are fulfilled.
With autotrading, investors can exploit market opportunities in real-time. Autotrading allows you to take advantage of market opportunities in real-time. There are perks in automated trading that make it an ideal choice.
The forex Autotrader, for instance, allows you to automate your forex trading activities. You have two options with autotrading:
- Connect a program to the trading software
- Program the trading software
Then, you can make your automated trades and base them on a tailor-made trading strategy.
Basic Form of Autotrading
The most basic form involves setting trade orders that will be executed in the future when specific criteria are satisfied. This form can be used by every retail trader. Advanced automated trading may eradicate human input.
The software runs without a human’s interference. However, the trader still needs to monitor their programs to ensure they are running properly. Technological failures are not uncommon in these programs.
Autotrading platforms are used to trade many types of markets including:
You will need a trading strategy that has been decided in advance. The pre-determined strategy is fundamental for effective automated trading. It determines when as well as why it will trade.
The strategy can be designed in different ways for various traders including retail, technical and institutional traders. Strategies such as scalping, trend trading, fading, and grid trading are excellent for autotrading.
Lots of technical traders limit themselves to brokers that allow plugins and external programs to be linked to their platforms. They are also partial to brokerages that offer coding programs in their platforms that create autotrading programs and indicators.
Autotrading in the Forex Market
Forex traders are partial to autotrading. Many platforms such as metatrader4 offer platforms that come with options to install autotrading programs. These are programs are provided by other traders as well as businesses.
The popularity of autotrading in the forex market results in tons of autotrading software that is untested. Consequently, you must be careful as you choose your trading platform to avoid scams. Metatrader4 allows investors to create trading programs using a coding language called MQL4.
Rules to Consider When Creating Autotrading Programs
Autotrading is not a straightforward process. There are several rules to consider before you create your programs. These include the following:
- The size of and definition of your position: For instance 10% of account equity or detailing the distinction between entry price and stop-loss.
- How your trades will be executed.
- The particular criterion that will generate a trade: Determination of the price (last, bid and ask).
- Closing trades and what will prompt the closing: For instance, placing automatic limit and stop-loss orders.
- When trading should or should not take place.
- Safeguards may be a requirement: For instance, alert an admin if too much equity is lost.
These criteria are excellent when the automated program you are making is basic. For more advanced programs, you will require additional factors for consideration.
Automated trading is quite popular, especially, among forex traders. It helps to capture market movements as they happen. The automated functions immediately generated trades and other features such as stop orders are triggered.
Traders can harness their emotions and stay within the rules they set since trades are generated automatically. Automated trading is, therefore, a viable option for all types of traders.