Why Automate your Trading Systems: The Pros and how to do it – Trading Strategies – 25 January 2023

Why Automate your Trading Systems: The Pros and how to do it – Trading Strategies – 25 January 2023


Traders and investors can translate precise entry, exit, and money management rules into automated trading systems that let computers execute and monitor trades. One of the greatest benefits of strategy automation is that it takes some of the emotion out of trading, as the trade is automatically placed once certain conditions are met.

Trade entry and exit rules can be based on simple conditions such as moving average crossovers, or complex strategies that require a thorough knowledge of the programming language specific to the user’s trading platform. They can also be based on the expertise of qualified programmers.

Advantages of Automated Systems

There is a long list of advantages to having a computer monitor the markets for trading opportunities and execute the trades, including:

Minimizing Emotions

Automated trading systems minimize emotion throughout the trading process. By controlling their emotions, traders often find it easier to stick to their plans. Because the trading order will be automatically executed once it meets the trading rules, traders cannot hesitate or question the transaction. Automated trading can not only help traders who are afraid of triggers, but also curb those who are prone to overtrading—buying and selling at every perceived opportunity.

Save time and avoid mistakes

With automatic trading you don’t have to sit in front of your screen 8 hours a day. You can just leave the Expert Advisor (EA) on and do other things to diversify your income sources. In addition, “pilot error” is minimized. For instance, if an order to buy 100 shares will not be incorrectly entered as an order to sell 1,000 shares.

Backtesting

Backtesting applies trading rules to historical market data to determine the viability of the idea. When designing an automated trading system, all rules must be absolute and leave no room for interpretation. Computers cannot guess and need to be told exactly what to do. Traders can take these precise rule sets and test them against historical data before venturing into live trading. Careful backtesting allows traders to evaluate and refine trade ideas and determine the system’s expectations. For example the average winrate or the amount of profit (or loss) a trader expects to make per unit of risk.

Preserving Discipline

Because trade rules are established and trade execution is performed automatically, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of loss or desire to make more profit from trading. In fact, one of the biggest challenges in trading is planning trades and trading plans (trading psychology). Even when a trading plan has the potential to be profitable, a trader who ignores the rules will change any expectations of the system. There is no 100% successful trading plan. After all, losses are part of the game. However, losing money can be psychologically traumatic, so a trader who loses two or three trades in a row may decide to skip the next one. If this next trade would have been a winner, the trader has already destroyed any expectancy the system had. Automated trading helps ensure discipline is maintained and allow traders to achieve consistency by trading the plan.

Improving Order Entry Speed

Since computers react instantly to changing market conditions, automated systems can generate orders as soon as trading criteria are met. Entering or exiting a trade a few seconds earlier can have a big impact on the outcome of the trade. Once a position is opened, all other orders are automatically placed, including protective stops and profit targets. The market moves quickly, and it can be frustrating when a trade hits a profit target or crosses a stop loss level before an order is even placed. Automated trading systems prevent this.

Diversifying Trading

Automated trading systems allow users to trade multiple accounts or different strategies simultaneously. This has the potential to spread risk across different instruments while providing hedging of hedged positions.What would be incredibly challenging for a human to accomplish is efficiently executed by a computer in milliseconds. The computer is able to scan for trading opportunities across a range of markets, generate orders and monitor trades.

How to Automate your trading

Automated trading systems typically require the use of software linked to a broker, and any specific rules must be written in that platform’s proprietary language.There are several platforms that allow automatic trading, but the most widely used is the metatrader 5 (MT5) platform. This free and easy to use platform allows you to program EA in MQL5. However, if you are not comfortable with programming, don’t panic MT5 has an integrated marketplace where you can buy or download free EA’s made by experienced traders and programmers. Indeed, these EA are able to generate profits sometimes exceeding 5000% in less than one year. But since it is often difficult to differentiate the good from the bad, we can recommend an excellent EA that uses a simple breakout strategy but generating impressive profits. This is Ice Scalper which you can test for free by downloading the free demo (the demo permit you to backtest the EA in the strategy tester) on the MT5 market place or buy it to use in real conditions.

Beware of online scams

Do your research, ignore providers who ‘guarantee’ perfect results with risk, and find reputable providers. Unfortunately, there are many companies online who will present false information in an attempt to scam you and take your money. With automated trading systems, there are many scammers who will claim to ‘guarantee profits’ with their systems (which the majority of traders know is impossible, as there are no guarantees with trading).

Therefore, it’s best to perform extensive research before you commit any capital towards an automated system.



Source link

Register at Binance