Automating the trading process can be very tempting, as it promises great profits with minimum or no effort from the trader’s side. However, there are challenges that have to be solved that are related to costs and knowledge required for developing or buying such advanced software.
Semi-automating your trading via outsourcing the technical analysis
It is possible to outsource the technical analysis side of the trading. This can be especially useful for people who have a busy schedule and can not find enough time to analyze charts thoroughly.
Trading signals
In this case, trading signals can have a tremendous impact on trading performance while minimizing the time for staring at the charts. Numerous options for trading signals of MyFXChoice can help traders outsource their technical analysis to a third-party signal provider. Technical analysis tools analyze various Forex pairs and make a conclusion if it’s a buy or sell. The website also offers signals for popular indices and commodities, which can aid traders of all sorts.
Copy Trading
Copy trading is another semi-automatic way to trade financial markets. In this case, the trader copies the trades opened by a professional trader. It is also possible to automatically copy all trades opened by pros with some brokers. This kind of trading has its own cons as well, as trading performance solely depends on the trader’s experience and profitability whose trades are copied. Because of this expertise, research and checking the track record before subscribing to a professional trader is a must. It is important to only copy trades from the most experienced and well-performing traders who have strong discipline and tight risk control strategies.
Automating the trading process fully
There are ways to fully automate your trading process by using advanced trading robots that can make decisions about buying or selling certain instruments when predetermined criteria are met. But this automatic trading implementation requires time and knowledge of programming languages. They can also be rented or bought, resulting in increased expenses, and can require a considerable budget.
High-Frequency Trading (HFT)
There are companies that employ High-Frequency Trading techniques also called HFT trading. It is much more expensive and requires advanced knowledge and technology to get profits. HFT trading is done by algorithms that can open positions within a fraction of a second and require high internet speeds. Successful firms have their servers located closer to exchanges to connect as fast as possible with the lowest latency. HFT is impossible for humans to do, as it requires decision-making at such speeds that humans can not even react.
Expert Advisors or EAs
Expert Advisors are automated trading systems that are programmed to enter and exit markets after certain predetermined conditions are met by price. They use mathematical formulas to analyze the price with various methods and then make a logical decision based on these conditions of trading. EAs are popular on MetaTrader 4 and MetaTrader 5 trading platforms and they can be downloaded from the internet or developed by the traders themselves. It requires programming knowledge to program an EA and may be a time-consuming and challenging task, so downloading one may be a better option. There are countless EAs available at the marketplace for free and paid. The paid ones can be tested on a demo account prior to purchasing for live trading.
Trading bots
Trading bots are the same in nature as EAs. They are EAs for other platforms like cTrader, TradingView, etc. they also employ logic to determine if certain criteria are met to open a position. Trading bots can be programmed in various programming languages like python, JavaScript, etc. The idea of fully automating the trading process is very attractive but developing a profitable trading bot is a daunting task. Many trading strategies are hard to translate into code that can be processed by the robot and require professional programmers in many cases.
Algorithmic trading
Also, similar to trading bots and EAs, algorithmic trading can be much broader and can employ various strategies for automatically trading on many different markets. Advanced algorithmic bots can even employ news and other fundamental information from the internet. Automated trading is very popular on Forex as most of the trading is done by algorithmic trading. Algorithmic trading software can use more complex decision-making techniques than EAs and trading bots. Also, some advanced algorithms can react to fundamental news and indicators. Most of the robots rely on some form of technical analysis by using various inbuilt or custom-developed indicators and market analysis formulas. In the case of EAs, some numerous inbuilt indicators and functions can make it easier to develop a simple trading robot.
Conclusion
Automatic and semi-automatic trading can offer several advantages for busy people and provide a way to still trade despite other important things. But there are some caveats too, including the costs of such robots or copy trading services and the expertise of third-party firms or traders whose services are purchased. Algorithms use various forms of technical analysis to analyze and track markets and make decisions when predetermined criteria are met. Programmers can use their experience to build robots while other traders who do not have much experience buying or downloading software could be the solution.
