Automated day trading is certainly one of the most intriguing aspects of day trading. It generally brings apprehension to it. This is mainly because of the fact that terms like algorithmic trading and so on are extensively used in the popular media.
In practice, there is nothing terrifying about automated trading. After all, it’s just a programmed software that makes decisions based on the specified instructions. Obviously, there are instances in which the automated day trading programs can be substantially intricate and complex. However, the basic framework always remains the same.
Today, traders can find many automated trading strategies. They can either construct an automated software based on previously available technical tools or can also make use of custom trading indicators. No matter which of these two strategies are used, traders should understand that the automated robots or EAs require to be carefully backtested to see if they can actually perform well in the financial markets.
Why Do Traders and Large Institutions Depend on Automated Trading Solutions?
With increased use of automation in trading procedures, more and more traders are now switching to high-frequency trading. Automated day trading gives rise to rule-based approaches and eradicates the influence of human emotions from trading. For example, one winning trade can generally boost trader’s confidence which eventually will lead to illogical or impulsive trading decisions ahead.
As far as the institutions are concerned, the role of automated trading is evident. Since these companies need extensive market research to execute their operations, they have to take assistance from the automated solutions that can simplify the entire market research process for them and that too without or very less human intervention.
Is Automated Day Trading Now the New Normal?
Similar to any other thing, automated trading also comes with its own pros and cons. However, the most crucial element of automated trading is in realizing when and how to use it. Day traders often use an automated approach to analyze different markets with diversified time zones. While the objectives might be obvious, this is comparatively a wrong strategy. There are cases in which the automated trading solutions can produce false trades. This often occurs during uneven or resilient market conditions.
Advantages of Automated Day Trading
- Curtails Emotions
Human emotions such as greed, excitement and disappointment can literally ruin your trading business. As automated trading works on preset instructions and rules, it omits the influence of emotions throughout the trading process. As trade orders are executed automatically as soon as the instructions are met, traders won’t get the time to feel dubious.
- Round the Clock Trading
No matter how seriously you take your trading business, you need time to sleep, eat and socialize with your loved ones. Let’s admit it, you can’t sit 24/7 in front of your computer and analyze the market and price fluctuations. This is where automated trading solutions comes to your rescue. With automated day trading, you can capture market opportunities that you would not have seized with manual working.
- Great for Beginners
It takes a great deal of experience and research to become a proficient trader in the trading world. Especially, you cannot expect to handle each and everything on your own if you’re a beginner. As automated trading fully manages your trades; be it market research, comparing options or placing trades, you can expect better returns. All you need to do is to pick the right automated Expert Advisor (EA) for your trades, insert instructions and let it work.
- Consistent Results
Unlike manual trading in which the margin of error is comparatively high, automated trading provides consistent results. Due to the fact that the rules are established in advance and trades are performed without any human intervention, discipline is generally maintained in automated systems. The emotional factors such as fear or overconfidence are the biggest reasons that impact the consistency and discipline. As your EA has already a plan in hand, it exactly follows the provided instructions without worrying about fear of loss, etc.
- Better Speed
There is no denying the fact that the delay of a few seconds can make or break your trading deal. As computers are able to quickly respond to the market opportunities, they are capable of drawing orders out as soon as the established criteria is fulfilled.
Diversification is possibly one of the biggest perks that comes handy with automated day trading. With automated day trading systems, you can trade different accounts at a time. This is incredibly great as it allows you to distribute risk over different market instruments while establishing a hedge against falling.
In conclusion, not all trades are alike. Being a trader, it is not possible to handle everything on your own. You need assistance and a helping hand that can streamline the entire trading process for you. This is why you should consider integrating automated solutions to your trading strategy in 2019 and beyond.