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Technological State of Automated Trading Systems

Posted May 31, 2019

We can trace the origin of the automated trading systems back as far as the mid-2000s. Yet, as distinguishable as they seem, many people still confuse these systems with forex robots. A lot of people even think that the automated trading systems are a type of expert advisors. Meanwhile, in this present age, the definition transcends the mere use of personal forex robots. To be specific, they serve other uses in the market.

Stock trading software system. Image credit: StockSnap via Pixabay (Pixabay licence)

Stock trading software system. Image credit: StockSnap via Pixabay (Pixabay licence)

What are the automated trading systems (ATS)?

Automated trading systems are a set of software used to regulate (control) the generation, transmission, and execution of trades in the forex market. In essence, trading is just an element of function of automated trading systems. Others are:

– Generating an entry trade order at the station of the trader. This could be done using your computer.

– Transmitting the trade order to the creator of the market. Sometimes, it could be to the ECN broker’s matching engines

– Transmitting the orders from the matching engines to the place where they get executed.

– Generating an exit trade order which goes through the same process to complete the cycle of a trade.

Technological Trends of Automated Trading Systems

When taking a more precise look at the best automated trading system software and their recent developments, and how to successfully use these systems for auto-trading in 2019, it can be noticed that already now more than 75% of the stock shares traded on the exchanges of the U.S. came from the ATS orders.

Some of the technology-driven features of ATS are, but not limited to:

1. Binary options, with incredible option and flexibility on any binary broker with offers of Forex and CFD through the MT5 platform. Companies which offer this also include self-built robot feature to design, test and implement the trading strategies.

2. ECN Forex broker and IC markets via the EQUINIX NY 4

3. Strong integration and MT4 offer, with ease of trading with the API integration and including many platforms like the MT4 (MetaTrader4), MQL5, and ZuluTrade.

 How Does The System Work?

Basically, the systems allows for some ‘free will’ to decide the rules and strategy of the trading. The programming or defining these rules into the computer systems follows, and the computer gets the work performed thereafter. In these days, there are some extremely sophisticated software choices that can be deployed to this end. You can decide to implement trade entry and exit rules using a condition such as a moving average crossover. And not only that. These tools can be built based on strategies with more complexity as well, which in turn necessitates intense understanding of the formal specification language that is particular to your selected platform.

As soon as the rules are programmed, the systems begins to monitor the markets, and automatically decides on whether to buy/sell or not, on the basis of the strategy rules you have chosen. With respect to your specifications, once you enter a trade, trailing ceases, and profit targets are automatically generated by the day trading algorithms.

Three options are available in this area:

1. Self-customization and creation

2. Hiring a programmer to code the strategy

3. Buying automated trading systems from the shelf. In this regard, there are many options to select from.

 What Does ATS Offer?

The strengths of automated trading systems are: reduction of human emotion, ability to back-test, enhanced order speed entry, consistent linking to the emotional element, and great diversity. On the other hand, automated trading systems can over-optimize, falling short of the mark in case of live trading. Other cons are: need to monitor and continuous updating along with the changing market conditions.

 What You Must Note Before Going Automated

As lucrative as automated trading systems are, you must keep some things in mind.

1. Start simple until you get some worthy experience. After that, try more complex ATS strategies

2. A lot of automated systems are suited to survive and excel in markets for specific trading styles. Therefore, be mindful that you might not get the returns as expected if you apply your ATS algorithms to many different markets.

3. Be a bit crafty with your mechanical strategy.


Finally, in case you are unable to get a commercially available software which suits your functions, the best option therefore remains developing your own proprietary software. There are diverse tools that you can use for this purpose. One of them is VIM. This option can be much beneficial as it ensures that you own complete control over the way the software works, looks and feels, lets you optimize the software to work faster than other available commercial software, and provides you a basic framework to build your software around complex algorithms. Conversely, this can be very expensive and it is certain to contain bugs if not tested properly.

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