Automated trading systems are computer programs that enable traders to establish particular commands for their trade entries and exits, through the help of algorithms. The best thing about them is that after setting up the rules, you let the system do all the hard work. In other words, the program will start trading on your behalf and earn profits for you.
Thanks to their convenience, these automated trading systems are present in roughly three-quarters of the U.S stock share exchanges. With the growth of the cryptocurrency market, needless to say, this trading technique became quite popular with crypto traders as well. However, while all of these sounds too good to be true, automated trading is not as easy as it seems.
Some trade entries and exit controls can be set up on simple conditions. However, others require sophisticated and advanced strategies that cannot be affected without the proper understanding of a programming language. That causes problems for many traders that want to move to this algorithmic form of investing and gaining profits.
The main question that bothers traders who are new to these automated trading systems, and one that scares them from even trying this as an option, is whether they need to know advanced coding to automate their trading.
Is It Necessary to Study Coding to Automate Trading?
To immediately answer the question, it’s safe to say that coding does not have to be a part of your trading. It’s truly a matter of preference, although it is often a beginner’s mistake to think that coding your algorithm is required.
Many traders work with developers to establish a system with their custom indicators, as this option allows adaptability. However, another possibility is applying strategy-building interfaces that can be found on individual trading platforms, where you can make your custom selection of technical indicators that you want to use as rules for your trading, and then start your automated trading.
Keep in mind that trading has been, and will remain a complex process, considering that there isn’t an investment strategy that is 100% risk-free. Therefore, no matter what your preference is, it’s essential to have the experience and to entirely understand the process.
How Does Automated Trading Work?
As it was previously mentioned, the process of automated trading consists of establishing precise rules for your trading entries, as well as the exit ones through an algorithm which will then use your preferences to the work for you and maximize your chances of gaining.
The software behind this type of trading determines whether it is a fully automated trade, or a semi-automated one:
- The first is a system that automatically registers the trades and executes them at the connected exchange(s).
- The second one does it partially, meaning it provides a particular set of signals that you can use. Once the criteria are met, the system starts trading until the market changes. The signals in the semi-automated type of trading are limited, however.
The entire process became very attractive to traders, thanks to its simplicity to execute the deals and practicality. Additionally, all the monitoring goes through computers, saving you both time and energy, as well as eliminating the “emotion” factor from your trades, therefore maximizing the chances for profit. That, however, does not mean that you should not keep a close eye on the system. Ideally, traders should regularly check and monitor the efficiency and accuracy of the system.
Automated Trading Without Coding
As mentioned, traders do not need to implement coding to automate their trading. Some platforms can help beginners, and even experienced traders to achieve results, by providing them with platforms where they can start building strategies efficiently. An excellent example of this is Super order.
Super order is cryptocurrency trading platform that connects with several crypto exchanges, and an automation tool that allows traders to quickly and efficiently run their trading strategies, without having to worry about learning how to code their automation trading systems.
Superorder is excellent for cryptocurrency enthusiasts that want to make their experience much easier, all while maximizing their profits. For new users, there is also a free trial in which you can check out whether this platform fits your unique trading needs.
Pros and Cons of Automated Trading
Finally, if you are interested in entering the complexity behind automated trading, it’s best to go over all the positive and negative things about it. Surely every computer program has its pros and cons, and here are some of the most common things that you need to keep an eye on:
Advantages:
Quick trade execution
One of the best things about switching to crypto trade bot is their ability to execute trades rapidly, minimizing the time you’d spend doing this by yourself. The orders will be placed and/or closed, as soon as the criteria for them are met.
Backtest strategies
What this means, is that traders can test their algorithms by comparing them to existing historical charts of previous market movements, generating information about the potential risk and providing valuable data to traders. That insight, however, is not flawless nor 100% reliable, due to the market’s violability.
Eliminates the emotion factor
As previously mentioned in the article, by switching to automated trading, you will remove the emotion factor in trading, which can be quite deceiving. Instead, the system will take action accordingly with the perimeters you previously placed on the algorithm.
Disadvantages:
Possibility to get scammed
Rule No.1, if something sounds too good to be true, then it probably is. It’s not uncommon for traders to get scammed while searching for a suitable automated trading system. In case you are offered high profits for a very low-cost price, chances are that you could be falling for a scam. Make sure you do a good research before investing your money in something.
Mechanical failures
Although this type of trading is quite advanced and implements sophisticated technology, it’s important to mention that it is not entirely error-free. Something as simple as internet connectivity issues can be a big problem for traders.
Over-optimization
Automated trading systems can help you earn a profit, but they should always be taken with precaution. The term ‘over-optimization’ refers to the idea that the tests done by the system should be 100% plausible and profitable in real-life trading. The perfect plan, however, does not exist, and once implemented on the market it can go wrong.
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