Automated Trading Platforms
Automated trading platforms that offer signals for you to copy, social trading and/or other algorithmic trading features can save you time and effort when CFD and forex trading. They also enable those of you who may not have the relevant skills or knowledge required to participate in the financial markets by taking a hands-off approach. Despite there being plenty of auto trading solutions out there, including automatic trading platforms and signal providers, it is important to know what you are looking for. In this guide, I will cover some of the pros and cons of automated trading whilst giving you a few different options to choose from should you wish to pursue it further.
What is automated trading?
Automated trading is when you take part in the financial markets by using a trading software or service that handles all of the trading activity for you. You would usually choose the financial instruments that you wish to trade, along with your risk preferences and any other specific settings.
Once you are setup, the automated trading system would do all of the work for you. This can be everything from analysing the markets to placing and managing trades on your behalf. You simply check back at a suitable time for you to see how things have been progressing. Auto trading provides a great way to trade online without having to sit and watch your screen all day long.
How does automated trading work?
It really depends on the automated trading platform that you choose. Once that decision has been made, you simply search for and setup an automated trading strategy with customised rules and conditions that meet your individual needs.
These factors are normally based on the timing of the trade entry/exit along with the stop loss or take profit you would like to use. For example, ‘buy 50 Amazon shares when its 50-day moving average goes above the 200-day average’.
The automated trading strategy that you setup will then constantly monitor the financial instruments and timeframe that you choose. Any trades will automatically be executed if the predetermined parameters are that you set are met. The aim is to execute trades faster and more efficiently, and to take advantage of specific, technical market events.
It is worth mentioning that this type of automated trading described above does involve you making some decisions in terms of getting things set up and keeping it running. However, there are many other automated trading solutions that involve minimal (if any) setup on your behalf. If you would prefer a more hands-off approach, you might want to consider some of the options in the next section instead.
What are the types of automated trading platforms?
Automated trading software has evolved significantly over recent years. I remember when forex robots were the prominent solution for anyone looking to trade forex without having to do anything themselves. Nowadays, there are plenty of auto trading services to choose from including signal providers, copy trading platforms and social trading networks. Let’s take a look at each of them individually to see what they can offer.
Trading robots are computer programs that run on specific trading platforms, commonly MetaTrader. You simply attach them to the charts and the built-in trading algorithm will look for buy and sell signals based on the robots underlying algorithm. When it finds a valid trade setup, it can take a position and handle the money management on behalf of the trader. This offers a hands-off solution and there are literally thousands of trading robots you can choose from, both free and paid.
Trading robots come with all types of strategies, including scalping, day trading and swing trading. Some robots can take many trades in a small amount of time, whilst others are more conservative. With some algorithms, you can even use your pre-determined strategies to follow trends and trade accordingly. Most will come with fully customisable settings so you can adjust based on your own trading style and risk preferences.
One of the added benefits of trading robots is that they can take the emotion out of your trading decisions. Negative emotions such as fear, anger and greed, can all have a big impact on performance. This can be the difference between good and bad results.
However, trading bots cannot see things that the human eye can which can put them at a significant disadvantage when compared to manual trading. For instance, they might not be aware of a big economic news release that causes volatility which would best be avoided. Not to mention, there are lots of trading robot scams out there that you should certainly try to avoid.
Copy Trading Platforms
Using copy trading platforms, you can mirror or copy the trades of other traders who will often have more experience. You can fully automate your trading this way and it gives you the opportunity to trade, even as a complete beginner. There will usually be a vast selection of trading strategies that you can choose from depending on your trading styles and goals.
You can check the most important statics such as profit/loss, drawdowns and duration, to help you decide which traders you would like to copy. You should be able to follow and unfollow traders as and when you like, without any commitments.
Social Trading Platforms
Social trading platforms are very similar to copy trading platforms, except for they usually offer a lot more features and functionalities. This can include an active community of traders and investors who share ideas, strategies and signals with each other.
Trading can be a lonely career choice at times, which is enough of a reason alone for some aspiring traders to consider automated trading via social trading platform. You can meet like minded individuals and learn from the experience of others whilst developing you own trading skills.
Whilst copy trading and social trading can both generate trading signals for you to copy, there are third-party trading signal providers who publish buy and sell signals along with money management for traders to copy, usually for a price. The signal provider will do all of the hard work in terms of analysing the market and others can copy their trades, usually for a fee.
The problem with this automated trading solution is that there are way too many scammers out there claiming to be professional but sending out junk signals without any thought behind them. Hence, I would always avoid this type of trading signal provider and instead, look for a regulated broker with an automated trading platform.
Does automated trading work?
Yes, it does work in the sense that there are plenty of good providers out there who have the advanced technology in place for you to automatically trade the financial markets. However, just because it works in terms of functionality, this does not mean that you will see good results. Even the best automated trading platform in the world is going to have losing trades from time to time. If you cannot handle a loss or expect to make a million in your sleep, you might want to consider another career.
Is automatic trading legal?
Yes, it is completely legal to use automated trading systems. However, not all automated platforms will be regulated and some might not even be allowed to server traders in your location. Therefore, you should check to make sure that you are dealing wit a legitimate company that is allowed to provide services in your country.
Is auto trading profitable?
No form of trading or investing is guaranteed to make money. Anything can happen in the financial markets and no manual or automated trading strategy can predict the future with absolute certainty. That is why it is important to never risk more than you can afford to lose and always try to test things on a demo account before making any financial commitment.
It is hard to judge the performance of any automated trading solution which is why I think it is best to see how things go for yourself. Just keep in mind that historical performance is by no means any guarantee of future results.
Is automated trading complicated?
No, you don’t even need to know how to code to set up automated trading. This is because there is a good selection of automated trading platforms that allow you to automatically trade the markets using pre-built solutions or by copying the trades of others. If you don’t mind getting your hands dirty, you can always create custom strategies that may require coding.
Automated trading vs manual trading
The main difference between manual and auto trading strategies, is the control that you have over your trading activity. If you are relying on an automated system to do all of the heavy lifting for you, then there is a limitation to what you can control. You might be able to set your maximise risk and loss, but the trading is going to be handled automatically. If the automated trading platform was to close down, you might need to start again from scratch.
On the other hand, you maintain full control over your trade decision when trading manually. It does mean that you will need to understand how to analyse the charts and spent time looking for opportunities, but this can improve your trading skills and knowledge over the long term. It also means that you have nobody else to blame should things go wrong. That may sound harsh, but it can be good to learn from your mistakes.
How do I start automated trading?
To start automated trading, you will need to choose a broker and platform that can support auto trading. You will then need to open an account and explore the different range of products and services they have to get a feel for what works best for you. There is no need to jump straight in with a deposit as most brokers will provide a free demo account for you to get started without needing to take any unnecessary risk.
What is the best platform for automated trading?
If you are happy to give automated trading a go and understand the limitations, there are a few top automated trading platforms that you can choose from. We have reviewed hundreds of trading brokers, some with copy trading signals, some that operate a social trading network and others with powerful standalone platforms that can run your own strategies. That being said, please see a selection of our best automated trading platforms below. We have considered everything including auto trading solutions, reputation, fees, features and more.
eToro is by far the largest and most popular social trading platform in the world. You will find there are thousands of traders whose strategies you can follow and copy. It is probably the most advanced and feature rich automated trading platform that I have come across. They have been around for a long time, are well regulated, and constantly improving by adding innovative technology which keeps them ahead of the competition.
DupliTrade is a copy trading platform that is compatible with the popular CFD and forex trading platform, MetaTrader 4. DupliTrade allows traders to automatically follow more experienced traders’ signals and strategies in-real time. Its user-friendly interface makes it easy to build and manage a trading portfolio while gaining valuable insights on successful trading strategies. You can get convenient access to DupliTrade from some of the best trading brokers in the industry, including Pepperstone.
Another popular auto trading platform amongst CFD traders is ZuluTrade. This platform converts the recommendations of other traders and automatically executes the trades in your broker account. You can browse the traders on ZuluTrade and select which trading strategies are best for your own individual goals and investor profile. ZuluTrade is not a broker themselves, instead they integrate with other brokers such as IC Markets.
AvaSocial is all about social trading within the AvaTrade community. The social trading app shortens the learning curve required to go from novice to experiences trader by putting you amongst a group of knowledgeable individuals. This brings copy trading into focus, where you can discover mentors, ask questions, and copy their trades. By learning from the best, you can mimic their performance in your own portfolio and become a better trader in the long run.
NAGA is a social investing network where clients of all experience levels can trade, like, share and copy investments on over 1,000+ financial instruments. You can get access to a user-friendly auto trading platform along with some excellent tools and educational content to help you get started on your trading journey.
Pros & Cons of Automated Trading
- Saves time analysing charts
- No need to learn how to trade
- Can remove emotional impact from trading
- Reduce mistakes from poor discipline
- Gives everyone access to trade online
- Diversify a portfolio with minimal effort
- Too dependent on technology
- Vulnerable to hacking and tech failures
- Over optimization can be unrealistic
- Past results not a reflection of the future
- Still needs careful monitoring
- Not really a long-term solution
Conclusion: do I need an automated trading platform?
If you are short on time and do not have the skills or experience required to trade manually, then an automated trading platform could be a viable solution. It will allow you to automatically trade forex, stocks, commodities, indices and cryptos. You will still need to spend some time getting things setup, so don’t rush and make sure you carefully consider all of the different options available to you.
There are some advanced automated trading solutions out there, ranging from trading robots, to copying signals and social trading networks. Just remember, even the best automated trading platform cannot guarantee you good results all of the time. I personally don’t think anything can beat learning how to trade manually. If you are new to trading online and considering your options, please feel free to take a look at our best brokers for beginners for some inspiration.
Bond Trading Platforms
Bond trading platforms have revolutionized the way investors buy and sell bonds. These platforms are…
TradingView Vs eToro
If you want to trade in the financial markets, you need a good trading platform.…
Trading 212 Vs TradingView
Trading platforms are software applications that allow traders to access the financial markets and execute…
If you're curious about taking control of your finances and exploring new opportunities, Invstr might…
Best Free Trading Platforms
Are you an aspiring investor looking for the ideal trading platform that won't break the…
Best Free Stock Charts
Free stock charts are invaluable tools for traders and investors to analyze market trends, track…