Automated Trading - Money Machine

By Author: Jubair Ahmed
Total Articles: 5
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One major constraint for many traders is the time required to watch the market and execute trades. It can be difficult to be active in the market if you work and have a family. Watching the screen day and night is tiring even for professional traders. You could leave the screen for a moment, and miss a market move.

Also, it is difficult to stay objective and keep trading emotionless when it is in front of you all the time. What if there was a better way where your computer did the work?

In the last few years, technology has evolved to the point where your computer can monitor the market, make the trading decisions and execute the trades. Theoretically, you can simply leave your computer on and it will automatically sit there and make money for you - like a money machine in your home.

What is the reality, and how can you use automated trading technology?

There are two approaches - you can have your trading model running on your broker's system, or you can run it on your own PC. The benefit of it being on the broker's system is that it can directly connect to the execution and price systems. ...
... You can turn off your computer if you want. There are no issues with lost connections or power failures.

Running your automated trading model on your own PC potentially gives you more control over the operation of the model. You can change or tweak it at any time. If your model is proprietary, you can keep the details confidential more easily. However, you need very reliable hardware and a good Internet connection, uninterruptible power supply and data feed.

One broker offers an automated platform that runs on their systems but unfortunately you can only choose from a list of predefined systems. Some of these systems may be profitable in some circumstances, but it very much limits your options when you can't specify your own trading system.

In testing, it was found that this system opened multiple trades within a few seconds of each other. Unfortunately many of these trades were unprofitable.

Another automated platform is called MetaTrader. This runs on your own PC, and you can program your very own trading model. A number of brokers accept trades directly from MetaTrader. This gives you a lot of flexibility.

Of course, a profitable system is key. MetaTrader does give you access to historical data, and lets you backtest your model against the data. Expert Advisors (trading systems) are available, either for sale, or for free download from forums. Test these carefully before risking your own money. It is worth testing in real time against a demo account first.

In summary, automated trading does offer a lot of opportunities, especially those who don't want to watch the market 24 hours a day, but the results are only as good as the trading system. Make sure that your trading system is sound and profitable before automating it.

Jubair Ahmed is a senior writer for My Trading Help, a website about trading stocks, forex, futures and options. My Trading Help includes free helpful articles on financial markets, trading techniques, how to build a successful trading system and automated trading.