Did you know that over 70% of all trades on Nasdaq and NYSE are placed by robots? This is so according to a report by a market research company highlighting the fact that in 2014, 74% trades were made by automated trading including High Frequency Trades (HFTs) and this is not just unique to US markets but across all global markets including Forex.
Robot trading is a reality and is expected to stay. In the early years of electronic trading, only institutional banks and large hedge funds were auto trading. But the advent of cheaper and faster computer systems and high-speed internet access, auto trading is now widely opened to retail traders through popular trading platforms like Metatrader, Tradestation, Ninja traders to name some from many. Now, more and more traders are adopting auto trading than before.
Should you auto trade? Many discretionary traders still believe auto trading is a risky business and auto trading can never replace the human intelligence when it comes to tackling complex entities like the financial markets. Yes, these concerns are valid and true, but do not limit yourself by not exploring and reaping the benefits auto trading could offer.
Start off with an attitude to use auto trading as a tool to help accomplish some tasks and lighten the burden of daily routine, instead of handing out your driver’s license to a robot and you stop driving to state a point in a simple way.
Use auto trading as your tool, and you can really transform the way you trade and it could free up valuable time for you to do other important tasks.
Here are the most useful tasks auto trading can do:
Multiple chart scanning round the clock
To find trade setups by reading chart patterns can be time-consuming. Especially, when you have multiple charts to scan and multiple trading time-frames, analyzing these charts can be a daunting task to do it manually. I have created an indicator that helps me with such tasks and alerts me of a trade setup that is happening. Once alerted, I will look at the chart trade setup and take appropriate trade calls.
Virtual non emotional buddy
One very important and highly valuable factor about auto trading is that the auto trader will not be whimsical like humans. It can prevent us to taking trades on emotions, like greed and fear that could be initiated by some breaking news or sudden price movements. Instead, the un-emotional buddy follows only to its instructions and unperturbed by external stimuli.
I can’t be around in front of the monitor all the time whenever a trade setup is presented. Auto trading is extremely useful to seize the opportunities right there and then.
Trade the plan, Plan the trade!
A common cliché, but the computer code is actually your trade plan. Without a plan, you don’t have a code. So, auto trading forces you to have a detailed and complete plan. It sticks to your plan all the time. Auto trade cannot add or alter your plan.
Auto trading is convenient and it relieves the trader from many routine tasks and alleviate the pressures of trading. Use auto trading as a tool to assist you. To make auto trading successful, ensure your trade strategy is complete and fully defined. Make sure the entry and exit rules are accurate. Next, back-test and forward-test your strategy to solidify your trade rules and strategy.
The other important thing to remember, don’t hand over your trading license to your auto trader. You have to be on the pilot’s seat, to monitor the trades and make the rightful judgment whenever is required. Have a mutual relationship between auto trader and yourself, to make it a profitable journey.
Author of Trade Smart with 10/20/30 Rule™ andTrade Forex with Confidence, where he reveals how to build a successful trading system using the 10/20/30 Rule he has developed and aims to change the way traders approach the financial markets, and to stay ahead from the crowd.