Automated trading systems are increasingly popular nowadays. Multiple solutions are available to traders and our article will cover 2 prevalent automated trading solutions: Autotrading and Social trading. Automated trading allows traders to use the available technology to trade relatively hands-free in the stock market. Autotrading involves orders being created and submitted automatically to the exchange based on a pre-defined strategy. This strategy is generally based on technical analysis indicators. Traders can decide to “Build” their own strategy or use a pre-defined strategy.
Autotrading is more powerful than algorithmic trading. Algorithmic trading involves no algorithmic decision making. It’s all about the execution of the orders following a set of pre- defined rules. Autotrading is more advanced than algorithmic trading as it covers identifying the technical indicators, initiating, closing the trade, monitoring the risk, profit targeting and algorithmic trading. In short, automated trading covers both the analytical process and the trading process and allows for both to be completely automated. That is the main reason why autotrading is a favorite among traders.
Trading platforms such as the MT4 platform allows traders to access automated trading programs to automate the analytical and trading processes in the MT4 platform. These programs are referred to as “expert advisors”. Once the set of rules is defined and uploaded to the platform, “expert advisors” can use them to identify entries, exits and profit targets and execute both the analytical and the trading aspect of the process.
Traders can also build their personalized set of rules using MT4’s MQL language or choose to buy pre-defined strategies.
Trading bots or robots are built on the MT4 platform using MQL. Trading bots generate trading signals and are particularly useful when trading Forex currency pairs and Cryptocurrency pairs. Metatrader also allows traders to build their own trading robots using their personalised set of rules.
The Application Programming Interface commonly referred to as API allows software programs (the platform traders are using) to interact with the market. This is an important feature especially in the Forex’s fast paced trading.
Think of it as an intermediary between the trading software and the market or exchange. In fact, APIs make it possible for trading software to access shared information such as order confirmations, execution and forex price quotations in real-time. It also allows traders to test their Expert advisors and strategies with historical or real time data.
What is Social trading or Copy trading?
Social trading allows investors and traders to access user generated content, it allows traders to copy established traders’ strategies, techniques and even trades. Some traders can shorten their learning curves by using social trading as they get exposure to vetted trading strategies that they get to test and integrate to their own trading strategies.
Copy trading enables traders to copy positions initiated and run by the copied investor. The copying trader’s account replicates all actions by the copied traders including opening and closing positions as well as stop losses. The copying trader can halt the copying process anytime or change the signals provider.
Mirror trading, although frequently referred to as copy trading is different than the latter. In fact, mirror trading allows traders to copy strategies rather than just trades executed by a certain trader. To put it simply, Copy trading allows to copy specific trades and mirror trading allows traders to copy a specific strategy.
Thanks to Mirror trading, the trader can choose a strategy that fits with their objectives and risk tolerance. The selected strategy will be mirrored on their trading account and the trades executed through the mirror trading platform.
Automated trading platforms
For a successful automated trading experience, A powerful and reliable platform is key to connect the traders’ broker account to the market and the trading community. The following two platforms are available for traders:
Mirror trader is a web based platform interface offering traders access to both strategies and trades. The trades can be executed in an automated, semi-automated or manual fashion.
The Mirror trader platform allows trading in the Forex market, stock market and provides access to trading commodities and indices. Charts, analyses, indicators and trading signals are available for all these markets so traders can choose what fits their style best.
Zulutrade allows traders to choose among thousands of talented Traders from around the world and follow their trading signals. Zulutrade offers traders a (virtual) personal assistant service to notify them of changes or to execute actions. They also offer an account protection feature called ZuluGuard to monitor the copied trader’s behavior and automatically remove a bad trader when a change in trading strategy is detected or if their performance deteriorates.
The ZuluGuard™ automatically calculates a trading exit value for each trade opened in the trader’s account. When a certain performance is not maintained, Zuluguard will close all open positions and replace the failing trader with a highly ranked one instantly.
Zulutrade is interesting as it gives traders the possibility to autotrade Cryptocurrencies such as Bitcoin, Ethereum, Litecoin. It also allows them to follow experienced cryptocurrency traders and copy their trades or strategies to their trading account.
Advantages and Disadvantages of Autotrading Methods
Autotrading and social trading allows traders to trade in the market without necessarily requiring an advanced knowledge of the stock market or Forex market. They also allow traders and investors to backtest their trading strategies on historical data and eliminating emotions during the trade. Autotrading also allows for a faster order execution and offers traders the possibility to run multiple trades effectively. It also eliminates the risk of human errors when filling orders.
These advantages combined can make autotrading powerful provided traders ensure they use a trustworthy platform and reliable strategies. As there are also drawbacks to these automated trading methods.
In fact, just like in any system, algorithm failures can happen, and traders needs to monitor their trades regardless of how reliable the software is. The strategy chosen is also an important factor to succeed in autotrading. Some traders can choose to design their own and end up with a poor strategy causing losses. Testing strategies is very important and traders are encouraged to use paper trading to tweak their methods till they have a successful set of rules.
Nowadays, Autotrading is an important part of online trading idustry. Hedge funds use it to manage large transactions and day traders can use it as well to benefit from its multiple advantages. It is important though to remember that even if the automation of the trading process is great, it can sometimes fail. Traders can set themselves for success by making sure they select the most reliable platform and the best software to minimize their risk and maximize their returns.