Finance

Benefits of building an automated trading system

Benefits of building an automated trading system

Stock investing requires more than funds and skills. Traders have to invest their time by looking for more ways to gain. These eventually grow, and it becomes challenging to handle all the stock details alone.  Some involve stock experts to help monitor the market, which is also hectic. These calls for modern technology to keep track of all information to avoid losses. The automated trading system (ATS) comes in handy for traders who can now operate the markets and maintain the strict rule. Large institutions and hedge funds used the Automated trading system; however, small retail traders can access the system with the latest technology.

What is ATS?

This an exclusive algorithm designed by individual traders to follow specific rules. ATS is also referred to as algorithmic trading or mechanical trading systems. The system is flexible, for you can program the software to be fully automated or execute specific details only.  These are referred to as black-box trading; there is also grey box trading, where you find trading ideas and notify the trader who will place the trades.

For ATS to function, you need to link the system to a broker that supports the ATS trading.  The automated system is developed using programming languages. However, you can still find systems developed using proprietary languages.  The Automated trading system has several benefits over manual trading, thus help build your profits fast.

Benefits of automated trading systems

Minimizing emotions

The automated trading system helps minimize motions sticking to the initial trading plan. The trader’s orders are executed automatically and once the system completes the order. No one can question the trade; it works best for traders who are afraid to place trades.  The ATS system doesn’t require any emotion to decide but follows the trader’s rules.

Backtesting

For an Automated trading system, all rules are absolute and cannot be interpreted otherwise.  Since the system uses computers, it doesn’t have time to guess on options. The device will follow one rule; the traders can use the rules and test them on historical data before they risk their money. Backtesting will allow the trader to evaluate the trading idea and know the system expectancy.

Preserves Discipline

Since all processes are automatic, the trade discipline is maintained even when the market is unstable. The discipline is lost if emotions heighten. ATS helps stick to the plan without any emotions involved, and protocols are observed. These also help minimize the pilot error, for example, when you buy 500 shares and incorrect entry of sell 5000 shares.

Improves order entry speed

Digital devices work fast and instantly; they work and respond quickly to any order.  The computer will react once the order criteria are met. You can get in and out of trade easily by just clicking and providing the order.  These have a significant impact on the trade outcome, for you can gain fast or lose according to the commands entered.  It also improves the speed as the process is automated and doesn’t require any manual interference.

Diversifying trading

You can operate multiple accounts using ATS at the same time.  The computer can handle different trading opportunities in milliseconds. For the manual process, it’s hard to run more than two strategies and generate orders simultaneously.

These are some of the best parts of ATS, which can help you create wealth fast inconvenient way.  However, the process has some disadvantages, such as mechanical issues that can arise, leading to loss of information.  Requires skilled personnel to monitor the system to avoid losses in the trades.

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