When used correctly, trading can make you rich. With the right technical analysis, a little luck, and the market can give you some great returns. Automated tools help you execute spread bets or CFD trades. They execute when a certain criterion is met, and your automated trading tool makes the trade accordingly.
Obviously, this can give you certain advantages. Let’s take a deep dive into what they are.
How They Work
The idea behind automated trading tools is that they help you manage your portfolio. The better tools give you control that allows you to sell or buy once conditions are met. So you could buy when the 50-day moving average goes above the 200-day moving average, for example, for a particular stock.
The technology behind them develops frequently, and it is becoming a highly competitive marketplace.
Constant Monitoring of the Markets
Unless you’re glued behind a screen day in day out, the chances are that you can’t monitor the markets 24/7. This is where your automated tools come into play. They simply execute as soon as the defined condition is met. They can’t be dragged into a meeting or have family matters to attend. They monitor; they execute.
Avoid Emotions
A key aspect of the trading tools is that they are never swayed by emotion, only the numbers. Emotions in trading have resulted in great gains, but equally, they have resulted in crippling losses. Successful trading is about looking at trends and making the right decisions based on those trends. When emotions come into play, it turns the whole thing into a Russian roulette scenario. Tools prevent this scenario.
Execute Multiple Trades
Automated trading tools, when configured correctly, can execute multiple trades simultaneously. Speed and scheduling are the obvious advantages, but it removes human error as nothing is missed unless you forgot to configure the tool. Using tools in this way ensures that you do not miss a profitable trade.
Back Testing
A nice feature of automated trading tools is that you can test your theory on historical data before putting the tools live ‘in the wild’. This may save you a lot of money in the long run and allow you to fine-tune your ideas.
Low Maintenance
Trading involves a lot of analysis, and once you’ve identified when you want to buy or sell, you can set the parameters for the tool straight away. Effectively, you have locked the trade into position, and you can now analyse another sector of the market.
Discover New Trading Opportunities
The better tools come with advanced market analysis indicators. Effectively, you can apply more scrutiny to the market and set more accurate automated trades as a result. With the extra level of scrutiny, you may see opportunities that other traders have missed.
Downsides to Automating Trading
There are some downsides to automated trading, so you should be a confident trader to use the tools. The tools are only as good as the parameters you define. Make the wrong analysis, and you will lose money as if you were making manual trades. That said, it is fair to say that with automated trading tools, you’ll have better portfolio management.
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Author: David Williams
Statements of the author and the interviewee do not necessarily represent the editors and the publisher opinion again
