The idea of automated trading software may sound like a dream come true. You may be excited at the prospect of a computer system that enters and exits trades automatically for you and possibly makes a profit with little effort.
But before you get swayed by the idea, there are things that you should know about. After all, not every automated trading system is the right option, and you must choose the suitable one for you. Following are quick tips for selecting the right system.
Check If There is Proper Backtesting
A Backtest is a historical imitation of an algorithmic trading strategy to determine how it might have performed on the data in the past. The results of Backtesting usually show the performance of strategies in terms of profits and losses and some famous performance statistics such as Sharpe Ratio or Information ratio that help you to quantify the strategy’s return on risk.
After all, since charts are critical to performing Backtest, ensure your software has detailed Backtesting that you can use across multiple timeframes. Hence a great Backtesting feature in the software can be a great plus for an automated trading platform. You can divide Backtest into two categories, like Research Backtesting and Event-Driven Backtesting.
The automated software you choose should give you enhanced order speed entry. It should be capable of automatically changing to market conditions and producing orders when your trade criteria are fulfilled.
After all, in the day trading world, only a couple of seconds can make a great difference to your potential win or loss. It will avert you from reaching the profit target before you have even managed to enter an order. So, make sure that the trading software you choose offers you speed in trading.
Different automated trading platforms give you access to the trading of certain securities only. For instance, software and platforms are dedicated to Equities trading or Forex trading only that too in particular markets.
You must be sure about what automated trading Software offers you and decide based on your needs. You should also take into consideration the frequency of data that you need. Some strategies may need daily EOD data, while some other strategies may demand intraday trading data.
Is There Diversity in the Software?
Automated trading systems should permit you to increase your hand by using manifold accounts and any number of strategies simultaneously. If your software has this feature, it allows you to spread risk over different instruments, and simultaneously it evades you from losing the positions.
At times, there can be a limit on the number of long or short strategies loaded on a specific account, and you may require an extra account for more strategies. Similarly, you must also check if you have sufficient memory on your computer for various accounts if necessary because it may be memory intensive.
Moreover, some software also offers you their trading strategies as add-ons that you can subscribe to by paying an episodic or one-time fee.
Ease of Use and Flexibility
Diverse automated stock trading platforms and software differ in ease of use. Some platforms may need actual programming expertise, while others may be simple and don’t require any coding. Most software provides you a demo version that can help you decide what fits your comfort level.
The difficulty of platforms can be different for diverse assets you trade, and hence you should check the other tools & features available to analyze the specific asset class. Moreover, go for a platform or software that offers you analytic functions with customizable and interactive charts along with numerous technical indicators.
Trading commissions can influence your profits to a massive extent. Thoughtfully choose the plan that suits your trading needs. Also, find out if there are initial or monthly charges and what is offered to you against it to make sure you are just paying for features that you want.
Maybe your computer does much of the heavy lifting, but you still need to manage and adjust automated software or platforms when needed. Select automated software for trading with a controllable interface, so you can make alterations whenever you want.
With so much automation going on in your automated trading platform, you may risk losing everything in case of malfunctions. So, ensure that the automated software you choose offers an effective risk management feature for your data.
To sum up, maybe automated trading can seem appealing for a diversity of reasons, you should not wholly consider such systems as a substitute for carefully executed trading. However, once you are attentive to your trading path and use the right automated trading software, you can make the most trading.