Automated Trading Systems

Trading Glossary: Automated Trading Systems

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In Forex, automated trading systems are trading tools that execute trades on one or more currency pairs using pre-set rules for entering and exiting. Usually, traders tend to use automated systems to execute trades more efficiently based only on market movements without human intervention and taking emotion out of the equation. Automated trading systems are known as trading robots that can monitor the markets during the day, looking for opportunities and executing trades according to predefined price algorithms.

Automated Trading Systems

They are computer programs designed by expert developers and are set to follow given trading rules. They are also referred to as mechanical trading systems, through which traders set programmed specific rules for both trade entries and exit to be automatically executed via a computer. Read How to develop an Entry and Exit Strategy in Forex Trading.

Automated Systems are programmed to search for trends, analyze market data and price formulas, generate trading signals; buy and sell levels. 

Automated trading systems are very useful for traders who lack the time to monitor the market, but still want to trade according to their own trading plan. Using an automated trading system enables you to open multiple trades in a short period of time, with the added benefit of taking emotions out of your trading decisions. That’s because all the rules are already built into the parameters you set and trades are executed without interference. Some trading algorithms let you use your pre-determined strategies to follow trends and trade accordingly.

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Benefits of using an Automated Trading System

Automated trading systems can provide flexible trading that fits your strategy and schedule through executing trades automatically, at any time. It helps also in controlling emotions and sticking to identified strategies, detecting new opportunities, analyzing price trends, with a wide range of indicators, and executing multiple trades simultaneously.

  • Saving Time and Money: By automating your trades, you won’t have to spend long hours monitoring price charts, applying your trading strategies or placing orders. All you have to do is set up the system on your trading platform.  
  • Stress-free Trading: When you trade manually, your trading decisions can easily be dominated by your emotions; greed or fear. Using an automated trading system will enable you to follow your trading rules without hesitation. 
  • Better Trading Performance: Automated trading systems help you meet your trading objectives; as your decisions are based on formulas developed by experts and experienced traders. They are algorithmic, so they behave according to the inputs programmed into them and developed by testing the historical data. 

Why use an Automated Trading Systems?

You have to observe different market trends, understand all the factors that may affect the prices, and follow both long and short-term price movements caused by technical and fundamental factors, in order to be a successful trader. This is not an easy task for many investors. Some traders choose to educate themselves about market cycles and price movements, while others prefer to use automated trading systems to make trading decisions. Trading automation enforces discipline, as every trade will be executed according to a pre-defined methodology. 

Before using an Automated Trading System

Some traders, usually beginners, think that automation makes forex trading simpler and risk-free. However, like any trading tool, automated trading systems have their cons as well. These systems don’t keep safe from market fluctuations, but they can guide you on how to go with the flow.

Before you choose to use an automated trading system you have to set your trading strategy and clarify your goals. Make sure to pick a tested system with proven trading history. But most importantly, never abide by your risk management rules. Choose a system that matches your risk tolerance, trading horizon, and investment objectives.

In Short

Automated trading systems are advanced trading tools that help traders benefit from experts.  However, they only guide you to seize better trading opportunities, and should not be seen as a replacement for manual trading.

Automated trading can be right for you if you’re looking for a tool that helps you to execute trades according to predefined parameters and avoid emotional trading. For better trading outcomes, it is advised to have some trading experience and market knowledge before deciding to use automated trading.

Start Trading in The Forex Market

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