What is automated trading?
Automated trading is a method of participating in financial markets by using a programme that executes pre-set rules for entering and exiting trades. As the trader, you’ll combine thorough technical analysis with setting parameters for your positions, such as orders to open, trailing stops and guaranteed stops. Your trades are then managed from start to finish, meaning you could spend less time monitoring your positions.
Auto trading enables you to carry out many trades in a small amount of time, with the added benefit of taking the emotion out of your trading decisions. That’s because all the rules of the trade are already built into the parameters you set. With some algorithms, you can even use your pre-determined strategies to follow trends and trade accordingly.
How does automated trading work?
First, you will choose a platform and set the parameters of your trading strategy. You’ll use your trading experience to create a set of rules and conditions, and then your custom algorithm will apply the criteria to place trades on your behalf. These factors are normally based on the timing of the trade, the price at which it should be opened and closed, and the quantity. For example, ‘buy 100 Apple shares when its 50-day moving average goes above the 200-day average’.
The automated trading strategy that’s been set will constantly monitor financial market prices, and trades will automatically be executed if predetermined parameters are met. The aim is to execute trades faster and more efficiently, and to take advantage of specific, technical market events.
What are the benefits of automated trading?
With automated trading, you can:
- Fit your strategy around your schedule – execute trades automatically, day or night
- Reduce the impact of emotional and gut reactions with planned strategies
- Identify new opportunities and analyse trends with a wide range of indicators
- Execute multiple real-time trades simultaneously and remove manual execution
What platforms can you use for automated trading?
The platform you’ll use for automated trading will depend on your trading preferences. At IG, we have several automated trading options available to our clients.
Automate your trading with assisted creation tools, enabling you to build simple or advanced strategies without the need for coding. With ProRealTime, you get access to an advanced, yet easy-to-use, backtesting suite to test your system. The platform has over 100 indicators and has been optimised to suit new and experienced traders alike. Get it for free if you trade at least four times a month.
Customise your trading experience by building your own expert trading algorithms, creating indicators, and placing a range of orders. Plus, import Expert Advisors (EAs) to help you find opportunities according to your pre-defined parameters. EAs can either notify you of an opportunity or open a position automatically.
Build your own platform and create advanced trading solutions from scratch. This platform enables you to code your algorithms from the ground up. Orders are filled using market-leading IG technology, ensuring you get the best execution. You can view real-time and historical market prices, analyse market instruments and trader sentiment information, maintain watchlists and more.
Is automated trading right for me?
Automated trading might be right for you if you’re looking for a technique that helps you to trade according to predefined parameters. This can be especially helpful when trying to avoid emotional trading. Automated trading is a good solution for someone who wants a low maintenance trading strategy that relies on advanced technology.
What automated trading systems could I use?
IG offers a variety of automated trading systems for you to use, including ProRealTime, MetaTrader4 and APIs.