The Evolving Demand for Automated Trading Platforms
Trading and investment have seen some significant changes over the last few years. The rise of the digital world has given way to a new future, where virtually anyone can build a portfolio, start earning wealth, and even achieve significant gains with the right strategies. In 2021 in particular, we saw a huge increase in the number of newer investors entering the field, taking advantage of apps and trading platforms which simplified some of the complications that would otherwise have prevented people from getting involved before.
After all, there’s a lot of work involved in choosing the right trading strategies, and not every investor has the right amount of time to dedicate to their campaign. Automated solutions and intelligent services take some of the strain out of the trading process, while paving the way for exceptional growth among users. However, they won’t necessarily be the right solution for every user.
What is an Automated Trading Platform?
Having automated trading solutions are essentially platforms or vendors selling algorithms or programs which can trade autonomously on a client’s behalf. It’s essentially like asking a robot to do all of your buying and selling for the day on your behalf, according to the rules you’ve set for how you want to use your money. Certain vendors can even offer specific algorithms based on existing research and market insights, for those with limited experience. Certain vendors claim their algorithms have led to significant returns in the past, and can continue to deliver exceptional results in the future. What’s more, the added benefit of these tools is how simple they are to access. All you need to do is click a button and you can avoid a lot of the headaches involved with keeping track of your portfolio each day.
Right now, these platforms are relatively small compared to some other major solutions on the market, but the lure of easier profits could mean they’re about to see significant growth in the months and years ahead. This could be particularly true at a time when volatility and confusion are causing uncertainty in the market. While there’s no true easy way to make money, there could be potential in these tools when used correctly, the key is figuring out how to leverage the automations available to you in the most strategic way possible.
How Do the Automation Algorithms Work?
Otherwise referred to as algos, automation algorithms are programs capable of collecting data for a strategy, testing the strategy to look at the P&L historically, and more. The same tools can also automatically establish trades when a specific buy or sell signal is present. For instance, if a user sets a strategy to purchase a stock whenever the price of the asset goes above a 20-day moving average, and sell if it goes below that average, you can use an automated algorithm. Without the right tool, you’d need to manually assess the charts yourself, determine the P&L of the strategy in the past, and track the charts for appropriate signals.
The manual strategy is tough to scale, because it takes a lot of time to track more than a couple of charts. Programs offer a simpler solution to a complex problem, using programming language and convenient platforms to unlock faster movements. Algorithms can even connect to specific datasets to test plans across various stocks at the same time. For investors looking to scale their portfolio, an automated strategy offers a fantastic route for growth. It also means users can access everything from live monitoring of market data, to alerts when a specific signal is generated, indicating a need to potentially change the portfolio.
Is Automation a Good Strategy?
Bots and algorithms can replace the need for traders to close and open positions manually, reducing the risk of emotional movements, and boosting scalability. They can allow for positions to be implemented when a user isn’t present at their computer, and allow for traders to take advantage of all kind of intelligence strategies to increase capital. What’s more, bots can help to increase market efficiency, boosting liquidity in a market where trading volume would otherwise be sparse.
However, there are risks too, such as being too passive about investment opportunities. There’s always a risk an automated effort could lose its benefits over time without a trader recognizing. Ultimately, the biggest threat comes from users accessing this platform without the right level of research to back up their decisions. In any environment, it’s important to investors to remember that making money requires constant work and presence.