Traders all around the globe are trusting their hard-earned money on automated algorithmic trading software. For executing the right type of trading orders, you’ll need a particular piece of computing software, like automated trading software. But choosing the right type of software is also essential. A software algorithm that is not designed for your specific needs can cause huge losses.
What Exactly Is Automated Trading Software?
An algorithm trading system that runs on an appropriate software should be given top priority. A trading algorithm executes its orders step by step, with the instructions from a human user or accumulated data from past transactions. There are only two ways to access the algorithm that will work for you, either buy it or make it yourself.
How to Select The Right Automated Trading System?
If you have decided to invest in automated trading software, it is crucial to look for the features that will help select one or the other form of the software.
Training From a Dataset Available From a Few Real-Life Examples
Also known as backtesting, this is just a simulation of how your current algorithm might perform with a previous outcome from the trading market. This simulation usually displays the accurate response of the algorithm in these real-life tests. Thus, you must invest your time and money in a piece of technology that can run such simulations.
The two backtesting categories are:
Access to Data For Backtesting
Trading platforms can have restrictions on data usage in this manner, or they can be selective when it comes to data hosted on their platform. Thus, you can decide on a platform depending upon your needs and access to data.
Using a Web-Based Platform
Look for automated trading platforms that provide a web-based platform, which runs on a programming language and is easy to understand. This makes backtesting way easier. Along with that, it will be easier for you to access the platform on any device. But this can affect the number of features that are available across all the platforms.
The same goes for choosing the best programming language for your algorithm. It should be easy to understand and execute. R, java, python, and so on are the preferred languages for programmers developing such software solutions.
Speed of Order Entry Or Latency
Financial markets tend to move fast, making sense to automate the process of trading in and out of stocks in a relatively quick manner. But this will only occur when you have trained the algorithm well, and the software makes quick trading decisions based on that knowledge.
Cost of Commissions
Trading commissions can cause your profit to fall, which is why you should choose an algorithm that doesn’t affect your profit margin that much.
Diverse Options to Invest in
Automated trading software gives traders the flexibility to conduct trading in multiple platforms or market types. And since your chosen algorithm will have access to data from different sources, it can simultaneously trade in risky markets and others that are safe.
Automated systems might seem like the next best thing, but they shouldn’t be treated like a substitute for human intuition in reality.
When it comes to trading or anything automated, one thing should always be kept in mind, and that is the fact that automated systems can fail and have failed in the past. So, they are not exactly water-tight!
For circumventing this issue, investors should look for a server-based algorithmic solution instead of any other method. Seasoned investors recommend that you should go for a hybrid system with elements of both manual and automated systems unless you have the expertise to deal with the algorithmic approach.