Pros and Cons of Automated Trading Systems

The aim is to execute trades faster and more efficiently and to take advantage of specific, technical market events. Automated trading systems turn the work of making and executing buy and sell decisions over to a computer. Trades are made according to rules, commonly tied to technical indicators based on stock price movements. The result can be a much more disciplined, precise, speedy and efficient approach to trading. Today, most trading activity in markets is initiated by automated trading systems.

What Is an Automated Trading System

Artificial intelligence and technology must face some scrutiny to ensure events such as the 2010 Flash Crash do not reoccur. Automated trading systems can take into account anything from technical analysis to very advanced mathematical and statistical calculations. Once the automated system is completed, investors can take a slightly more hands-off approach, as the computer will complete the majority of the work. There are definitely promises of making money, but it can take longer than you may think.

What are the pros and cons of automated trading?

Implementing the backtesting functionality can take between 80 and 120 working hours. When it comes to getting in or out of a trade, even milliseconds can affect the deal. Therefore, when designing the system, it’s crucial to achieve the lowest possible latency. This is particularly relevant for volatile markets when prices can change too quickly. High-frequency trading systems generate orders immediately when the trading criteria are met, maximizing the chances of getting the best possible deal.

However, the system still needs to be monitored to ensure it is running as it should be. It is often attractive to investors because it takes the emotion out of trading, which can frequently impact trading strategy. The platform you’ll use for automated trading will depend on your trading preferences. Know what you're getting into and make sure you understand the ins and outs of the system. That means keeping your goals and your strategies simple before you turn to more complicated trading strategies.

History of automated trading

Solarflare introduced “OpenOnload” in 2011, which implements a technique known as kernel bypass, where the processing of the packet is not left to the operating system kernel but to the userspace itself. The entire packet is directly mapped into the userspace by the NIC and is processed there. Latest developments in laser communication, earlier adopted in defence technologies, have further shaved off an already thinning latency by nanoseconds over short distances. Factors like the time taken by the destination to reply to order requests and its comparison with the ping time between the two destinations must be considered before making such a decision. The decision may be dependent on the nature of the strategy as well.

What Is an Automated Trading System

The computer can also follow various strategies at the same time – much easier than a human ever could. This allows the investor controlling the system to pursue a more diverse trading strategy. Automated trading systems also improve the speed at which trades can be made.

Algorithmic Intraday Stock Trading System

Making settings and parameters customizable takes between 160 and 220 hours. Let’s clarify how much it costs to create a trading platform and what features need to be implemented. The final cost may vary depending on the contractor’s rate, so for simplicity, we measure the cost in person-hours.

They can send the limit order, set the stop loss/take profit value, cancel orders, close positions and adjust many other parameters to improve the results. The implementation of a trade management function requires about hours. Trade log enables users to get a holistic overview of their trading history helping them to highlight successes, identify mistakes, and fine-tune their preferred strategies. The trade log usually contains details such as the rules set for orders, instruments, order types, number of contracts, price, time, etc. The estimated time required to implement the trade log functionality is 60 – 95 person hours.

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