Imagine being able to capitalize on market opportunities in real-time? Yes, that is what autotrading allows you to do.
So what exactly is Autotrading?
Autotrading is a program-based trading that enables traders to buy and sell orders placed by an underlying system. You set-up conditions and once met, a trade occurs. It can involve complex programming and in some cases, require trading platforms to support external plugins or programmes.
One of the most basic forms of autotrading available on most online forex trading platforms is the stop loss or take profit features. You set conditions on the number of pips required to perform either of the mentioned actions.
Most broker platforms today equip the trader with the capability of installing third party programs. Through the use of autotrading in forex markets, several software programs are not entirely of standard, and therefore investors must thoroughly vet their providers.
Let’s take a look at some of the essential things that you, as a beginner, need to know about autotrading.
Capabilities
The basis of autotrading is a pre-determined stsategy. Depending on the type of investor, it is possible to structure it in different ways. For example, those interested in real estate can deploy basic actions that buy investments at set regular intervals throughout particular periods. Alternatively, the investor can place conditional orders in securities that meet specific parameters. They will allow the trader to open a position once it reaches a particular price.
Institutional investors use complex systems that allow for conditional orders and some sophisticated strategies such as grid trading, scalping and grid trading. Technical traders, on the other hand, use brokers that will allow external plugins to connect to the platform.
There are brokerage platforms that offer autotrading capacities. Investors need to already have their proprietary platforms to use algorithmic programming in autotrading.
Strategies
For institutional investors, they tend to use complex algorithms to open trade positions for their securities portfolios. They define criteria based on their objectives. It may include but does not limit it to buying and selling securities to maintain a particular percentage on each stock or match holdings in the portfolio to an index as is in the case of index trading.
For day to day technical traders, they use autotrading to invest based on the market signals. Their main aim is short term gains, and autotrading helps them in risk management, i.e. take profit and stop loss automation. An investor can also use autotrading programs to capitalize on trends that bring about trade gaps, ranges or scalp the buy/sell spread.
There are numerous strategies that traders can employ in their activities, and it only limits them to their capacity of coming up with the most effective and profitable strategies for their trades. Check out this video for the strategies:
More strategies can be found in this interesting article.
Conclusion
In conclusion, as much as autotrading may appear appealing and advantageous, one should not substitute it for meticulously executed trading. Also, mechanical failures may occur as in any system ever developed; therefore, they require constant monitoring.