What is automated trading?
The arena of trading has gone through several developments from the beginning stages. In the past, trading activities were carried out only on stocks and bonds. Later, several other instruments came in. Finally, the industry is now facing the rise of cryptocurrency trading. Along with the change of instruments, the developments in technology have also been bringing different forms of trading. Such technology is the use of a trading bot for real-life trading.
A trading bot is a computer-generated system that makes trading decisions and takes actions on the market by itself. It does so with the help of pre-set conditions and programs running in the back-end. There is also a mechanism called automated trading that works similar to that of a trading bot. Here, the trader should provide trading rules to the computer system and let the system do the rest according to the algorithm loaded in it.
You can find several platforms out there like bitcoinrevolution offering automated trading with the help of bots along with manual trading. However, there are several benefits of trading with these automated systems instead of doing it on our own. In this article, let us discuss some highlights of an automated trading system that overpowers manual trading activities in brief.
Highlighting factors of automated trading system
No emotional interference
The best highlight of using an automated trading system is the avoidance of human emotions that can interfere in trading decisions to lead to losses at times. For instance, let us assume that you are trading manually with a specific trading strategy. If there is news circulating that forecasts a sudden shift in the value of the cryptocurrencies, you will fear and will change the plan. So, you may have to collapse the flow and end up with more losses in most cases. Only if you stick to a single strategy regardless of whatever factors that arise, you can succeed in trading in the long term. An automated trading system will help you achieve this as the bots will not have emotions.
Backtesting is nothing but the testing process that involves the application of a newly developed or acquired trading strategy to the ancient market data to find out whether the strategy works. By doing so, the money you have at the moment will not go anywhere but you will get an idea of the outcome of that strategy. If it works fine with the old market trends, it will most probably work well in present conditions too. If there are any issues, you can change the strategy a bit to make it work well. Almost all auto trading platforms will have this backtesting feature and you can take advantage of it.
Let us assume that the market seems to be good to buy cryptocurrencies of a value worth X dollars. If you type something by mistake that exceeds this value while buying, you would have to face losses even if the market is doing well. So, you should avoid simple errors while placing trading orders. You need not worry about these minor errors if you are using an automated trading platform. The computer system will never make an order by mistake and every value will be entered only according to the pre-set rules. So, you can avoid several unnecessary losses.
Sticking to trading limits
The best trading discipline every trader should follow is to devise a trading plan with a specific limit for both profits and losses. The next discipline not to miss will be to stick to this plan regardless of your emotions. However, no one will follow this in the case of manual trading. If you are making profits, you will get greedy to make a little more profit and will continue the trade. If you are losing money, you will get emotional and will involve in more trades than those mentioned in your plan to get the lost money back. However, you cannot do this in an automated trading system. The trade will only execute as per the rules. This disciplinary trading action can avoid numerous heartbreaks while trading with cryptocurrencies.