Online trading is becoming more straightforward, thanks to technology, but traders also have to continually hone their skills to make the most of their strategies and make more money. A point may come when the trader might not handle the entire gamut of work independently or might not be a programmer himself. An automated trading system or ATS has helped traders efficiently manage their trading business while following a strict set of rules.
ATS is largely used by hedge funds or institutional firms, but today even a retail trader can easily use them. It is a set of algorithms designed to follow some instructions fed by the trader who developed or installed it. The software is also known as the algorithmic or mechanical trading system. In case the trader doesn’t know how to program, he could also buy it from someone who does and can create the software designed to his needs.
It is designed to completely automate and implement trades based on the idea known as black-box trading. It can also find trade ideas and inform the trader who would place the trades, known as grey box trading. To make sure that the ATS runs smoothly, it should be linked to a broker that will support this kind of trading.
It is important to have an excellent knowledge of programming if you want to build an ATS. Or you could also hire a programmer to do it for you.
Either way, here are five reasons why you should invest in automated trading systems.
1. Takes Less Time
Traders sometimes have to spend hours monitoring positions and market mechanisms. While they use all their skills and knowledge simultaneously, it is a lengthy and time-consuming process. It will prevent you from trying out all your strategies.
Thanks to ATS, you could build as many strategies as you want and put them all to work one by one, without much effort from your end. The results are also flawless, thanks to the algorithms, with hardly any human error. All you have to do is monitor and study algorithms from time to time to see if they are working as you want them to.
2. Backtesting Your Strategies
You will be able to backtest your strategies with ATS. This can be done over long periods, and you will come to know if the strategy you are implementing has met with success in the past or not. If there were failures, you would be able to come up with new strategies.
Not only will you make informed decisions, but you will know for sure if the strategy will help you make more money in the future. You can apply the strategies to simulator accounts to predict future results without risking real money in the process.
3. Keeping Things Impersonal
It isn’t common for investors and entrepreneurs to get emotional about the task at hand, and traders are no different. Emotions like regret, greed, and fear often play a role in investing when you are trading manually. It can result in a few wins, but the chances of losing are also immensely high. With ATS, you can remove emotions completely out of the equation and only depend on rules and data to implement your strategies.
4. Consistent Trading
Trading is risky, and new traders have a lot of queries in their minds. No one can guarantee that you will get 100% wins every day. However, with a tried and proven system in place, you will develop a more consistent pattern, improving your chances of winning in the long run.
ATS helps you through those difficult periods of low outcomes because it does not let negative emotions get the better of you. You keep on focusing on your strategies, balancing out the losses, in the long run, ultimately resulting in profits.
5. Trade Diversification
With an automated trading system, you can access multiple accounts at a time, implementing numerous strategies simultaneously. You would not be able to do it with a single account, and this is why large firms use a trading system to get more done in a limited time frame. It also enables the trader to help spread risk evenly over financial instruments and sit back to see the results.
Hence, with ATS, you can get a lot more done in trading, which will help you mitigate your risks. This will be one of your most profitable investments, and the returns will impress you overtime when the profits start coming in.