At least once in our experience as a trader or investor, we thought of using programs, trading software that would do our difficult job, regardless of any kind of emotion or tiredness. But is all this really possible? Is it possible to trust the countless trading software that we put on the market? Can they be a real help or at least a support function for our online trading? What are the decisive aspects that must be considered when choosing a trading software on the market?
In this article, we will try to answer all these questions by describing the pros and cons of each strategy and then conclude with some objective advice on the subject.
What is automatic trading and how it works
Automatic trading is a method of executing orders using pre-programmed automatic trading instructions that take into account variables such as time, price and volume to send small portions of orders to the market over time. They have been developed in such a way that traders do not have to constantly look at charts and manually repeat the kind of operations that can be done systematically.
In order to better understand how it works, let’s start from an example: consider trading on your favourite financial instrument chosen among the British stocks, you have at your disposal the chart with the candles of your horizontal time reference and some technical indicators ready to suggest the moment of entering the market, what in jargon is called signal.
The “signal” is nothing other than an impulse coming from the data processing made by our brain which translates into a movement, that of your hand index which goes to click on the “Buy” button.
Well, if you have a strategy that works most of the time, you could write it in code so that the software automatically does what you would do manually.
It is clear that not everyone has the computer skills to be able to translate your thinking into code that can be exploited by the trading software, so you need to turn to programmers or find ready-made software on the market that is compatible with your trading ideas.
An example of automatic trading software code. Market entry takes place by satisfying a certain type of hypothesis
What is trading with automatic software for and who is it for?
The automatic trading software therefore serves to reset the discretionary part of trading. Traders may have good or bad insights, but execution depends on many factors, such as control of emotionality and speed of execution. It often happens that the movements of a particular financial instrument, especially in short-term trading, are so fast that the trader does not click in time to confirm the purchase that it is no longer convenient to do so. This is because merchant banks use automatic software called HFT (high frequency trading) which execute orders in fractions of a second and therefore at a speed that is not reachable by the human eye, which then sees the movement with a fair delay.
Automatic trading therefore serves to zero discretion, because it is executed independently of our will and automatically managed by the software according to the parameters selected by the operator. As for any other software, the trading software “stupidly” executes what the programmer has written without considering other external factors of distraction.
This aspect is very important because it allows you to overcome all those barriers that do not allow the majority of traders to become profitable in the long term because you will no longer need to follow the charts for hours, stressing and making mistakes due to fatigue or executing operations dictated by the “belly”.
Where to find automatic software for online trading
Automated software is present within all trading platforms, such as the Meta Trader 4. By going to the appropriate section, you can select an infinite amount of software, which can be free or paid for. My advice is not to trust them and to perform back-tests on a demo platform. When you have enough cases on your demo account to define whether the software you have chosen is profitable and compatible with your systems, you can move on to the next step, the real account. To help you with your research, look for software that has some kind of feedback from key users and don’t rely on unknown developers who may have written software full of errors.
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