Online trading has taken the financial community by storm due to its user-friendly nature as well as the many options that individuals can choose. One system which deserves particular attention involves the concept of automated trading. In order to fully appreciate what this method could signify for your portfolio, it is wise to examine some of its primary highlights before moving on to review some professional recommendations. Might automated trading represent the wave of the future? Let’s take a closer look.
Automated Trading Systems Defined
Automated trading systems are comprised of a series of computer-based algorithms. Investors have the ability to set their own “rules” that are intended to determine specific entry and exit points. These principles can be simple (such as the price of an asset rising above a certain point) or they can be more advanced (such as those created by a coding expert). Once they are put in place, the computer itself will determine when it is time to buy and sell; taking much of the pressure off of the individual trader.
The Main Benefits Involved
There are several advantages which can be directly attributed to automated trading. One of the most profound is that it tends to remove emotion-based decisions from the equation. This is particularly important during times of high volatility or if an investor is attempting to manage multiple positions simultaneously. Another interesting feature is the ability to “backtest” a set of rules. Backtesting involves applying present trading parameters to past investment scenarios in order to determine if they need adjustments. This is an excellent fail-safe option before such a strategy is used to execute live trades.
Multiplying Your Efforts Within a Single Platform
As mentioned in the previous paragraph, those who have been hoping to oversee numerous assets will be pleased when this type of algorithmic trading solution. This is especially important for anyone who becomes involved in fast-moving sectors such as the Forex markets, as an increased number of holdings will boost the chances of turning short-term profits. The automated nature of these systems has taken the guesswork out of such oversight. the CMC Markets platform allows for multiple order types while providing additional features such as chart-based trading alongside simultaneous long and short positions.
Are There Any Pitfalls to Avoid?
No trading system is perfect and it is important to note some mistakes to avoid when using automated trade executions. One example can be seen when referring to algorithmic stop-loss orders. While this method allows traders to quickly move in and out of the market, some experts believe that short-term volatility could offset medium-term profits. Other problems such as system failures or connectivity issues could remove the investor “from the loop” at important times. However, these drawbacks are comparatively minor when looking at the bigger picture.
Are automated trading systems right for you? If you have been considering this possibility for some time, it is a good idea to take a look at some of the features offered exclusively through CMC Markets. Not only will you be able to learn about the associated mechanics, but you have access to a wealth of asset classes and personalised trading options. Algorithmic trading could therefore represent an excellent addition to your portfolio.