An increasingly large number of the global population is currently involved in various trading types within the financial marketplace. The IT industry continues to evolve each day, bringing about significant changes to all spheres of life.
The use of automation in the trading of assets like stocks, forex, and more recently, crypto is a relatively new phenomenon. The strategy is, however, a time-old concept that was first tried out to sell and by funds by R. Donchian in the mid-20th century. It went into oblivion until the 80s when various notable traders revived it.
Since then, investors have been utilizing the autotrading model to manage massive assets. Before we delve deeper into the topic, let us understand what auto trading is to realize the benefits this model brings.
So, What Is Autotrading?
Also known as automated trading. Autotrading occurs when someone programs their trading software to follow customized strategies that enable the automatic trading of assets. In layman’s terms, it uses automated systems to handle significant trading tasks such as execution and analysis.
Advancements in the technological field, evidenced by tons of innovations, have made these models more accessible to retail investors worldwide. Initial autotrading systems required constant observation by a broker or financial manager. They used this algorithm-based mechanism to manage portfolios of clients mainly. But during the last decade, all this changed. For instance, most stock shares trades in various financial markets of the United States began as an order on an automated trading system.
However, contrary to a common misconception, all automated trading systems require some level of human intervention. Their function is to assist with the execution of orders. Even though the algorithm may be on point, remember that market dynamics are ever-changing. It can be stable this hour and fluctuate the next. Thus, one should continuously update, check, and supervise the autotrading software.
Top 3 Benefits Of Using Automated Trading Strategies
1. Allows use of several accounts at the same time
Automated trading can be applied to numerous elements of the financial market. You can sell and buy concurrently using multiple accounts. All you have to do is tailor-fit each strategy to serve the function you want for stock shares,
2. Makes backtesting possible
Backtesting is a process used by programmers to assess past market data to determine the viability of an underlying algorithm. Backtesting allows one to make accurate predictions, a crucial aspect during the designing and developing of any automated trading platforms. It will enable the system to be critiqued then optimized to optimize its potential.
3. Minimizes the influence of emotions in trading
Some people tend to buy and sell at an opportunity, which is highly inadvisable. Others are afraid to take risks and trade of their own volition. But with auto trading, the trade orders are executed automatically without emotional interference.
Take Away
The thought of taking a nap or going for a stroll and returning to a few extra bucks in your trading account is an alluring prospect. With an automated trading system, all this is possible and much more. Autotrading is a proven strategy that can work for you.
