Many things happening presently
in the markets are automated, including when information is released and how
orders are matched and reported. Many deals are now processed using computer
algorithms and software. Take this as a market trend, since the trend towards
automation is only natural. Technology has always driven the markets. Investors
are willing to exploit that technology to take advantage of competition as new
technologies develop.
Mechanical trading systems,
algorithmic traded or automated trading or system trading are referred to as
automated trading systems. It enables traders to lay down specific rules for
commercial entry and exits that can automatically be executed using a computer
once programmed. The rules of entrance and exit and cash management by traders
and investors can be turned into automated
trading systems. One of the primary drawbacks in strategic automation is
that it removes some emotion from a business.
The trade entrance and exit rules
might be based on basic terms such as a moving average crossover, or intricate
tactics, which require a full understanding of the user trade platform
programming language. The knowledge of a trained programmer can also be used
for these. The usage of software linked to a direct access broker is often
necessary for auto
trading systems and any special rules must be in their proprietary
language.
However, many traders choose to
develop their indicators and techniques. They often work in close collaboration
with the programmer to design the system. While this normally needs more effort
than using a wizard on the platform, it provides far more freedom and can be
more gratifying for the results. Unfortunately, there isn't a flawless
investing strategy that will ensure success just like anything else in the
trading industry.
The automated trading evolved via
this wish for an edge. It has few major benefits:
• Computers and algorithms
produce fewer errors than people do.
• Computers and algorithms are
significantly more rapid than people are.
An individual blinks his eyes for
a few hundred milliseconds. Today, a Trading Algorithm automatically reads,
analyses, makes a business decision, sends, and executes an order. And not only
have a single order but thousands of commands. A person cannot compete with such
speed.
It is therefore not surprising
that automated trade has become such a large element of the markets.
Institutions automate larger orders and market manufacturers place their orders
through an algorithm. High-frequency traders run their black boxes, which ship
and frenetically cancel orders, aiming to generate modest profits of hundreds
and thousands of trades a day. The private investor will not be able to design
and apply their algorithms long before.This growth of special order types was observed
by the regulators and several market participants. Many investors and traders
say that certain types of orders are only accessible to some market players and
create unfair markets. Automated commerce has stayed. It will be increasingly
available, but so will the fairness argument. It is exhilarating to follow the
markets but also frightening for many. There is little knowledge of the
automated algorithms on the market and those who operate them don't want to
discuss their techniques.