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Automated Day Trading

Here we will look into the best automated day trading software available in 2020 and explain some successful strategies. Nowadays a whopping 75% of traded stock shares are traded using automated systems. Otherwise known as mechanical trading systems, algorithmic trading, system and expert advisors. All these programs have the same function, enabling automated trading after the trader has to input their desired rules and strategies. Automated trading software systems will then trade autonomously and earn you money whilst you carry on living your life.

Automated Day Trading Explained

You need to be clear about your strategies and the rules your want your automated system to follow, and once programmed it will trade on your behalf.

There are easy ways to program entry and exit rules for example just moving the average crossover will be a straightforward program designation.

Or you can program in-depth complex strategies according to your knowledge.

The markets will be monitored and decisions made by your automated program according to the rules and strategies you have put in place.

Orders for protective stop losses , trailing stops and profit targets will automatically be performed by your trading algorithms according to the specifications you input once a trade is entered.

These decisions must be made swiftly on your behalf as it can be the difference between a small loss and a devastating hit.

Some software these days can even make your trades dependent on the current news.

Strengths & Weaknesses

Strengths

  • Not based on feelings-one of the biggest problems with day trading is a lot of the time people resort to their feeling and intuition which can be risky. Whereas an automated day trading system will execute trades dependent on the rules you have set, not on your emotions.

  • Backtesting ability –So one of the most useful things about most automated systems is that they will run your new rules and strategies against past data. Allowing you to see the functionality of your rules against realistic data, and even determine the system’s expectancy (how much you are likely to earn.)

  • Speed is everything-in the trading game a couple of seconds can change everything. An automated machine that is programmed to react to certain situations will perform much better than a human. A worst-case scenario could be not being able to reach a profit target or dropping past a stop level before you have a chance to place an order, an automated system will protect you from that.

  • Risks-as a day trader- if you lose four times in a row you may be less excited about trading again, but that next one could be the big winner and because of natural caution, you miss out on it. An automated machine will continue, and take that risk for you.

  • The winning formula-if you have spent years putting the time into your strategies you know what works best, then now is the time to put them in an automated system, after all, you know you have the winning recipe.

  • Mixing it up-you don’t have to stick to just one formula. You can have multiple accounts with different strategies and run them all at the same time to cover your bases.

Weaknesses

  • Over-optimizing-unfortunately it can take time to perfect an automated system so much so that it can cope well with a live market, they often fall short. Stick with small trades until you have time to test it on the live market for a substantial amount of time.

  • System has a  mind of its own- nothing is perfect, and a system is still a system that can have errors. Unfortunately, automated systems can pick up on false trends and that can be a huge risk. As shown by the Knight Capitol group in 2012 who thanks to their system picking up on a false trend lost $440 

  • All systems need updating- your system must be continually updated to keep in track with the changing market and developing trends. Leaving you dependent on whoever it is that updates your software. 

  • Keeping a check on your system-unfortunately it is not as blissful as setting up your system and then just walking away. It must be monitored in case of connection problems, computer crashes, and strange unpredictable changes in the market.

Getting Started

Play safe as you start out, wait until you have a good amount of experience under your belt before making complicated strategies. 

As a beginner copy trading is a great way to start off and get an idea of the industry.

Many automated systems function really well under certain conditions with certain markets. 

Not every glove fits all as they say. So be aware that you may not get the profits you’re are looking for if you try and apply one system to various markets.

No automated system can make guesses so be very sure that you leave no room for error.

Copy Trading

Copy-trading in its basest form is an incredibly simple way to execute automated trading. The idea is to copy the trades and therefore the strategy of a well-seasoned trader or group of traders.

You can quite easily copy as a high roller makes $1m trades and as a beginner put $100 on the exact same trade if your system is set up to copy there moves and do the same as they open and close trades. 

Some of the biggest decisions are now out of your hands. You don’t have to take responsibility for the opening or closing of trades, you just need to decide which traders to copy. 

You basically don’t need to get your hands dirty with an automated system set to copy trading.

Finding The Best Automated Software

As with all software systems, it is important to do your research as no one system is ideal for every situation.

It all depends on you and what you need, what market you wish to enter, and how much you want to do yourself.

If you are a skilled trader you could, even develop your system from scratch to create the perfect customized system just for you.

Here are some of the most popular automated trading systems out there.

Developing Your Own Software

The alternative to buying a ready-made automated system is to build your own from scratch and create a software system as close to perfect as you can.

Nowadays there are many user-friendly tools out there like VIM or you can even hire an expert on various freelancing marketplaces.

It is important to be aware of the pros and cons of creating your own software.

Pros:

  • Your design, your look, how you like it.

  • You can streamline your software by eviting any features that you don’t deem necessary making it run faster than any readymade system.

  • You can build the software around the most complicated algorithms if you are an expert trader.

Con:

  • It is most likely to be more expensive than a pre-packaged automated system.

  • Software that hasn’t been tested more often than not will contain bugs

  • Untested software is riskier, most automated systems have been tested rigorously.

  • Time-consuming research must be carried out.

Now the decision is whether to build it yourself or to hire a professional

Programming the Software Yourself

To be able to create your own software you need more than just a basic understanding of programming, you must have experience and know-how when it comes to coding a trading algorithm.

There are plenty of software packages out there, but you must have a basic understanding of programming algorithms to use them. If you know what you are doing one of the best systems out there to help you build your automated trading software is Vim.

Vim’s founder Bram Moolenaar in 1991 created a universal text editor designed to make it easier to develop your own software. The best thing about it is that it is ‘charityware’, all proceeds go to helping children in Uganda.

This command-based editor allows you to use commands, in place of menus to activate functions. It offers a lightweight, clean interface with a large offering of features. A very popular system thanks to its ease of use and ability to detect bugs. It has the capability to be programmed in hundreds of different programming languages and an extensive library of features to choose from.

API

API-Application Programming Interface is what enables the communication between your trading software and the platform to communicate so you can place orders. Although you are free to develop your software any way you like your only limits will be API. The trades you make must be supported by API. IF you know which features are imperative to your strategy then you must choose an API that offers that capability.

Your automated trading system must also import live market data so that your algorithm makes correct decisions based on ‘ real-time’. If however, your strategy doesn’t rely on instant real-time data but instead on other more fundamental factors then you do not need to worry so much whether there is a slight delay or not.

Hiring a Freelancer

The other great option if you do not have the time or the know-how is to hire a freelancing software developing expert. Whether that be sourcing someone local to you or from one of the many freelancing platforms online. A freelancer found online is mot likely to be cheaper and you can find some very experienced freelancers internationally. But do not skimp, find the best that you can afford, because any errors at this point could cost you a pretty penny later down the line. Before contracting a developer make sure you have a very clear idea of what you want and what you expect from the software. Make sure you give n in-depth description of all the functions you need in your automated system. Make no assumptions, everything must be clearly explained when working with a developer online.

Final Thoughts

Automated trading is becoming more and more popular every day. If you are drawn to this system then you must be aware of your strategy and how to check on it. No automatic system is perfect, and nothing can compare to the real thing, but it will save you time.  But you must keep monitoring your system and do not take it for granted, it is important to still be very involed with your automated trading software.

Further Reading

  • Quantopian.com – a web site for researching historic stock price data and writing trading algorithms that can be backtested on that data.

Research

Books

Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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