What is algorithmic trading?
The process of using high-speed computers programmed to follow a defined set of instructions for opening and closing of trades based on strategies devised by human trade, is called Algorithmic trading or algo trading in short (also known as automated trading).
This software automatically alerts traders whenever trading opportunities fitting into the defined criteria arise so they can act on them.
Advantages of algorithmic trading
·Removing emotions from trading
Creating a trade plan is easy, but sticking to it is another matter. That’s where a computer-programmed automated trading system can help – it removes the feelings from the trading and executes set-ups based on a pre-defined plan. Stop letting the emotions be the problem for taking profit too early, or cutting loss too late.
·Time saved from monitoring your trades
Such automated systems save you the hassle of monitoring your screens all day to look for new trading opportunities, or worry about when to close a position. They also cut the time needed to scan thousands of markets for an entry signal.
·Ability to review and refine strategies
A strategy that can withstand the test of time when market conditions constantly change is difficult to find. That’s why you should refine your strategies periodically, even when they’re working well. The maximum drawdown (max loss from a peak to a trough of a portfolio) is the key metric to look out for in a successful trading system. Don’t forget that to breakeven a 50% loss a 100% rise is required.
The process of testing the effectiveness of a trading strategy based on historical data before using it for live trading is called backtesting, and it’s all about probabilities. You can maximise your probability of success by finding the best strategy for a particular market.
How do I start automating my trading with MarketsTrades?
MT5 is a worldwide trading platform. It’s key feature is the availability of Expert Advisors (EAs) – automated trading systems that can be downloaded and implemented. If you have programming skills, you may try to write your own EAs and test them on the MT5.