Automated trading definition

Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.

If you want to set up automated trading, you will need an automated trading system. You can then set up the rules that you want the automated trading system to follow, based on common variables like price and volume or on technical indicators like moving averages or Bollinger bands. The trading strategy you set up can be as simple or as complicated as you want, but truly advanced strategies can require learning the programming language associated with your automated trading system.

Why traders use automated trading

One major reason why traders utilise automated trading is that it removes emotion from the trading experience.

Trading strategies can be trialled before going live (a process called backtesting), and are faster in execution than traditional trading. There are numerous problems associated with removing the human element from trades that need to be avoided, however. Flaws in set up can quickly become costly, and technical failures can be problematic. Automated trading systems need monitoring to ensure that they are performing as intended.