Traders and investors can turn their precise trade entry, exit and other rules into automated trading software that allow computers to execute and monitor their trades on their behalf. Automated trading systems typically require the use of software linked to a direct access broker, and any specific rules must be written in that platform’s proprietary language. There are many advantages for any trader or investor to use automated trading software systems:
Minimizing Emotions. Automated trading software systems minimize emotions throughout the trading process. By keeping emotions out of the equation, traders typically have an easier way sticking to their trading plan. Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade. In addition to helping traders who are afraid to “pull the trigger,” automated trading software can curb those who are apt to overtrade — buying and selling at every perceived opportunity.
Backtesting. Backtesting in automated trading systems is a process of testing historical market data to determine the viability of the trading idea. When designing an automated trading system, all rules are absolute, with no room for interpretation. The computer cannot make guesses and it has to be told exactly what to do. Traders can take these precise sets of rules and test them on historical data before risking money in live trading. Careful backtesting allows traders to evaluate and fine-tune a trading idea, and to determine the system’s expectancy – i.e., the average amount a trader can expect to win (or lose) per unit of risk.
Diversification of Portfolio. Automated trading systems permit the user to trade multiple accounts or various strategies at one time. This has the potential to spread risk over various instruments while creating a hedge against losing positions. What would be incredibly challenging for a human to accomplish is efficiently executed by a computer in milliseconds. Automated trading software systems are able to scan for trading opportunities across a range of markets, generate orders and monitor trades.
Preserving Discipline Because trade rules are established and trade execution is performed automatically by the automated trading system, discipline is preserved even in volatile markets. Discipline is often lost due to emotional factors such as fear of taking a loss, or the desire to eke out a little more profit from a trade. Automated trading software helps ensure discipline is maintained because the trading plan will be followed exactly. 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.
One of the biggest challenges in trading is to plan the trade and trade the plan. Even if a trading plan has the potential to be profitable, traders who ignore the rules are altering any expectancy the system would have had. There is no such thing as a trading plan that wins 100% of the time when human is trading manually. After all, losses are a part of the game. But losses can be psychologically traumatizing, so a trader who has two or three losing trades in a row might decide to skip the next trade. If this next trade would have been a winner, the trader has already destroyed any expectancy the system had. Automated trading systems allow traders to achieve consistency by trading the plan.
Improving Order Entry Speed Since computers respond immediately to changing market conditions, automated systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few seconds earlier can make a big difference in the trade’s outcome. As soon as a position is entered, all other orders are automatically generated, including protective stop losses and profit targets. Markets can move quickly, and it is demoralizing to have a trade reach the profit target or blow past a stop-loss level – before the orders can even be entered. An automated trading system prevents this from happening.
DBATE is a simple and straight forward, easy to use GUI based Automated Trading Software application. There are No wizards and no coding required at any stage. Suitable for anyone and everyone.
