Here we look at the best automated day trading software 2020 and explain how to use auto trading strategies successfully. More than 75% of shares traded on African exchanges come from automated orders for trading systems. Known by a variety of names, including mechanical trading systems, algorithmic trading, system trading, and expert advisors (EAs), they all work by enabling day traders to enter specific rules for trade entries and exits.
Once programmed, your automated day trading software will execute your trades automatically. Sounds perfect right? You can sit back and wait while you watch the money roll in.
Automated Day Trading Explained
You decide on a strategy and rules. It is then programmed into automatic systems and then the computer works. The software you can get today is extremely sophisticated.
Rules for entering the trade and exiting the trade can be rooted in simple circumstances, such as moving average crossover.
However, it can also be built on complex strategies, which require a deep understanding of the programming language specific to your platform.
Once the rules are programmed, automated systems can monitor the markets and decide whether to buy and sell based on the specific day trading rules you have chosen.
Although depending on your specifications, orders for stop losses, trailing stops and profit targets are automatically generated by your day trading algorithms once you place a trade.
If you’re in a fast-moving market, instant order entry can be the difference between a small loss and an earth-shattering trade if the trade moves against you.
Some advanced automated day trading software will even monitor the news to promote your trades.
Strengths and weaknesses
Strengths
- Reduce Emotion – One of the biggest benefits of automated day trading algorithms is their ability to remove human emotion. Many day traders will buy and sell based on feelings, automated day trading systems will execute the trade once the specified rules are met.
- Verification Capability – Most automated systems allow you to test your rules and strategy against historical data to test the likelihood of success. This allows you to hone the perfect strategy and work out any kinks before putting real money on the line. It also allows you to determine the expectation of the system (the amount you can expect to win or lose).
- Speed – Your automated software gives you a better order of speed input. Able to automatically change to market conditions and generate orders as soon as the trade criteria are met. In the day trading game, just a few seconds can make a significant difference to the potential profit or loss. This will prevent you from reaching the profit target or falling past a stop level before you have even managed to enter an order.
- Consistency – This links back to the emotional element. If you’ve lost the last four trades, you may get cold feet on the next one. But if the next trade is a huge winner, you’ve just shot yourself in the foot very expensively.
- Cement a winning formula – If you’ve spent years perfecting a winning strategy, automating it can become even more effective. Which in turn can provide you with bigger and more consistent profits.
- Diversity – Automated daily systems allow you to stretch your hand by using multiple accounts and any number of strategies at the same time. This allows you to spread risk across differeer on market conditions.
- Updates – your automated day trading software needs to be updated along with changing market conditions. This means you need someone who knows exactly what they are doing. This puts you at the unfortunate mercy of whoever writes and updates your software.
- Monitoring – People mistakenly think that once they have formulated their automated day trading strategies, they can sit back and let the computer do all the heavy lifting. You should be on the lookout for computer crashes, connectivity issues, unpredictable market anomalies. Not to mention something else that leads to missing or duplicated orders.
Getting started
Even with the best automation software, there are several things you need to keep in mind. Keep it simple at first as you gain experience, then turn your hand to more complicated automated day trading strategies.
Copy trading can be a good introduction for beginners to automated trading.
Many automated systems are customized to perform in certain markets and for specific trading styles.
Keep in mind that you may not get the returns you’re hoping for if you apply your automated day trading algorithms to different markets.
Whatever your automated software is, make sure you design a purely mechanical strategy. Automated day trading systems cannot make guesswork, thus removing all discretion.
Copy trade
At the most basic level, copy trading is a very simple form of automated trading.
Copy Trading allows you to copy the trades of another trader. Thus, by reviewing past performance and specific trade information, you can ‘follow’ a trader (or better yet, a group of traders).
As they open and close trades, you will see the trades being opened on your account as well. You can adjust how much you want to invest, so someone with $100 can still follow the trades of someone trading $1 million.
Copy trading means that you take no responsibility for opening and closing trades. You still have to choose the traders to copy, but all other trading decisions are taken out of your hands.
Copy trading is perhaps the least “hands on” of any automated trading.
Finding the best automation software
There is no one size fits all automated day trading system.
It will depend on your needs, the market you want to apply it to, and how much customization you want to do yourself.
Skilled traders may even want to develop their own trading software from the ground up to achieve ultra-fast automated trading that is completely customizable to their preferences (more on this later).
Here are some of the most popular ready-made automated systems out there:
- AlgoTrader Software
- MetaTrader (MT4 and MT5)
- Tradestation automated software
- Etna automated trading software
- eSignal automated trading software
- Option Robot Automated Software (Binary Trades Only)
- Roboadvisors
Developing your own software
If you can’t find commercial software that provides you with the features you need, another option is to develop your own software.
It’s easier than ever thanks to code editing tools like VIM and online marketplaces that make it easy to find freelancers with the necessary skills.
Developing your own software comes with a number of benefits and risks:
advantages:
- Complete control over how the software works, looks and feels.
- You can optimize the software to run faster than available commercial software, as you can include only the functions you need.
- This allows you to build software around complex algorithms.
risks:
-
- ders to design it for you.
Programming the software itself
Designing your own trading software requires a basic understanding of programming, as well as knowledge about coding a trading algorithm.
Numerous software packages help make the process easier, but they require you to have basic programming knowledge.
No tool can help with lack of programming skills, but for expert coders, Vim is one of the best editors to build your auto trading bot.
Vim is a universal text editor designed specifically to make it easy to develop your own software. It was created in 1991 by Vim’s founder, Bram Moolenaar.
Vim is based on Bill Joy’s vi text editor. Vim is ‘charityware’ – all its proceeds are used to help children in Uganda. Vim makes it very easy to create and edit software.
- Can be expensive if you don’t know how to do it yourself. Like most construction projects, the final cost is usually higher than the initial estimates.
- The software will not be tested and will almost certainly contain bugs. Commercial software has gone through thousands of hours of testing and is used by thousands of traders, exposing many problems. Your software may perform in unforeseen ways. Even large commercial operations have had problems with trading robots making surprise trades or being triggered by other robots’ actions to make large sales.
Study all available software before deciding to develop your own software.
There are two main ways to build your own trading software. Do it yourself or hire someonent instruments while still hedging against losing positions.
Weaknesses
- Overoptimization – A focus on fitting the curve leads to automated day trading algorithms that should be fantastic in theory, but often fall short when it comes to live trading. For example; many people set up a plan with almost 100% profitable trades that should never experience a withdrawal. Apply it to a live market, however, and it can fail completely. Therefore, you should trade at low value until you iron out all the wrinkles.
- System Disappears – even the best automated day trading software can cause false trends. While the price reacts to the development of a wrong trend, a false trend can get out of control. This was demonstrated by the group Knight Capital in August 2012; who lost over $440 million in just half an hour when their trading software reacted
Vim is a command-based editor – you use text commands, not menus, to activate different functions.
The command-based interface allows the software to have a very light, clean interface, while still offering an extensive range of features.
Vim is suitable for both beginners and experienced developers.
The platform is very popular with software developers because the tool makes it easy to review your code and find bugs before they cause problems.
It can be customized to handle hundreds of programming languages and supports many different types of plugins for additional functionality.
API
If you prefer to develop the software yourself, you can make it almost as you wish.
However, your freedom will be limited by the API (Application Programming Interface) that your trading platform offers.
The API is what allows your trading software to communicate with the trading platform to place orders.
Your trading software can only make trades that are supported by the APIs of third-party trading platforms.
If a particular feature is important to you, make sure you choose a platform with an API that offers that feature.
Your bot will also need to input market data in some way, possibly in ‘real-time’ (with extraordinary delay), if your trading algorithm is to react in any way to what is currently happening in the markets.
If trading decisions are based more on fundamentals and just waiting for the “right price”, getting market data with a millisecond delay may not be essential.
Hire a Software Builder
If you don’t know how to create the software yourself, or if you don’t have the time to do it, you’ll need to hire a third-party freelancer or company.
You can choose either a local developer or a freelancer online. It is easier to communicate the desired result and achieve it with a local developer that you can see in person.
It can be cheaper to use a freelancer online. It may also allow you to choose a developer who is more experienced in trading software, as this is a fairly uncommon skill.
Make sure you hire a skilled developer who can develop a stable software. Don’t try to get it as cheap as possible.
Good trading software is worth its weight in gold. A poorly designed robot can cost you a lot of money and end up being very expensive.
It is essential that you give the developer a detailed description of exactly what you expect from the trading software. Include all desired functions in the job description.
Don’t take anything for granted at all. The developer cannot read your mind and may not know the same things that you do.
Final Judgment
Automated day trading is becoming more and more popular. However, if you go off-trail, you need to test your strategy back and forth frequently. However, let us be clear that nothing is traded manually.
If you rely on automation, don’t get complacent.
This was highlighted in the ‘Market Wizards’ book series by Jack Schwager, when he interviewed successful automated day traders.
All emphasized that they were very involved in their automated strategies, and do not sit back.