Algorithmic trading software is the key to success in the trading business. If you are not using any then it is time to get one. Almost 70-80 percent of online trades are done using algorithmic trading software. The benefits of it go beyond automation. That’s why you will find multiple trading software available in the market. However, in order to maximize profits, you need to pick the right one. But how would you know which one is right? Well, in this guide we will discuss in detail how you can pick just the right kind of software for your trade.
What is algorithmic trading software?
Algorithms have many uses in the present world. In simple terms, an algorithm is a set of instructions based on a strategy. Algorithms follow those instructions. Subsequently, algorithmic trading software is computer programs. They follow the predefined strategy for the execution of trade orders.
Algorithmic software identifies the trade opportunity with the potential of profit. It executes trade to maximize earnings. The process takes only milliseconds to complete. At this fast pace, traders using the software have a huge advantage over those who are themselves reading charts and making trades.
Reasons for Using Automated Trading Software:
Here are the benefits attached to automated trade:
Algorithmic trade is way beyond the speed of a human being. Software is quick to catch signals and executed trade accordingly. Additionally, good software will analyze multiple indicators at the same time. As a result, options for profitable trade increase. Moreover, the software is especially beneficial in scalping strategy where traders try to make maximum successful, small trades.
The factor of human error is always present when you are trading manually. For instance, you may accidentally enter the wrong stop loss figure. However, the algorithmic trading software will never make such a mistake. Therefore the level of accuracy is high with its use.
Software, as you know, doesn’t have emotion. While humans have plenty of them. In the trading business, where the market is volatile, emotions can rise to fights. Humans are more likely to make wrong decisions in such situations. On the other hand, automated software will go on with its predesigned strategy. It will not get off track or worried as a result of a few failures. Consequently, one consistent strategy will bring fruits in the long run.
In manual trading, traders don’t have the leverage to know whether a certain strategy will work or not. Nevertheless, best automated trading software provide this opportunity. You can run the software on past data to see the response. That way you can know exactly how effective the software would have been. Afterward, you can make trading live.
Monitoring the markets takes time and money. Traders have to sit in front of computers all the time observing market swings. But, with software monitoring is done automatically. Additionally, transaction cost reduces. Hence algorithmic trade saves both cash and time.
All of the above-mentioned processes increase the efficiency of trading. Every time you run the software live, it brings you results. It is both time-saving and cost-saving method of trading. Furthermore, you can trade 24/7 without physically being in front of the computer during that time. Hence new traders should give the algorithmic trading platforms a shot.
Picking the Algorithmic trading Software:
Every trader has unique needs according to their approach towards trade. Some want to make the living out of it while for others it is a side hustle. You should know your category. Subsequently, you will be able to pick the software that caters to your needs.
Traders have two options:
- Build a Software
- Purchasing one from market
Building a trading Software:
Building software has its own benefits. You can customize it according to your needs. However, it demands skills. You should have a strong grasp of programming languages for building software. It will require time and effort. As you are building it for yourself so only you can identify bugs in it. Run it as a test for multiple times. Eliminate loopholes and build a strategy into it. Without strategy automated trading software is worthless.
Succinctly put, you should weigh the pros and cons of building algorithmic trading software before opting for this option.
Sofware are good if they do exactly what you want them to do. Otherwise, risk factor is also high with algo trading. Here we will jot down some key features that you should look for in trading software:
Know your Psyche:
Experts say that the biggest enemies of traders are traders themselves. The reason for that is impulsiveness and impatient behavior which comes naturally with few bad trades. To this end, you should know that haste makes waste. Millionaire traders fascinate everyone but they didn’t earn all their wealth overnight. So, you too should be disciplined enough to go with one strategy for a long time. Moreover, pick an algorithmic software that suits your trading strategy.
Master your own psychology. Know whether you will go for bog profits only or intent to make small successes. Algorithmic software should assist you in this and not go counter to your plan. Therefore trader’s psyche is an important consideration in picking the right software.
Pick the trading strategy:
Now that you know what kind of trader you are, pick a strategy for yourself. The algorithmic trading software should run with that strategy. For instance, if you want to buy the dip and hold then algo software should do the same without you constantly monitoring it. Do research on strategies. Grab ones that are little known but work like magic. However, once you have selected a software based on a particular strategy then stick to it. The frequent change of plan can cause harm to your overall capital. Therefore, patiently wait for profits to start rolling in.
The ready-made software from the market are complete packages in themselves. Nevertheless, traders want room for customization. Software builders may not have encountered certain issues that users do. Therefore, customization can solve these newfound problems. Additionally, this feature gives a personalized feel to the software. For example, the moving average (MA an indicator) cross over number can be customized by users to see where the trading market is going.
Another configuration tool is leverage for coding into the software. You can write programs using C++ or Python. While buying the algorithmic trading software look for the extent of customization it offers. Best algo software have a high degree of customization.
The trader will have to eventually interact with the software for starting the trade. Better representation of data makes it easier to analyze different factors. For example, trading indicators are shown in the form of graphical charts. An understandable pattern and easier navigation through different points yield better results. Hence don’t underestimate the importance of visual appeal of software. Choose the one with an excellent User interface and user experience.
A complex and difficult to understand software will increase your problems. Remember, the best automated trading software is supposed to amplify your earning. So, it should do so by a simple and transparent process. Read the manual of software and run the trial version to get hands-on experience with it.
This feature is a way to assess the performance of a particular strategy. With the help of the backtesting feature, users run the strategy over the historical data to see how the software would behave. However, you need to have historical data for this to work. Subsequently, you can see the profit margin. Backtesting gives you a chance to manage risk prior to running software on actual real-time data. There are two types of backtesting, event-based and research-based. Choose an algorithmic trading platform that is compatible with both.
The price of algorithmic trading software is different based on their functionalities. You have highly-priced software as well as free of charge software. However, as a trader, you should pick cost-effective yet efficient software. Don’t compromise on quality. For instance, digiebot is excellent automated trading software. It may seem costly but its services are worth subscribing to. The point is, spend your money on software that works for you.
Last but not the least important consideration for choosing the best algorithmic trading software are reviews. Reviews make it easy for you to make a decision. People who have used the software before you can identify the loopholes, bugs, or any other problems. It gives you a heads up on what to expect. Some software providers like digiebot have customer reviews listed on their site. However, you can research the best algorithmic trading software reviews through search engines as well as social media.
Choosing the right algorithmic trading software is difficult. But, once you have made the right call then it is all good for you. So, know exactly what you want. Look closely through the services sections of the software. Do complete research, count your capital, and go for the software with best reviews. Nevertheless, keep monitoring the performance. The ‘set and forget’ strategy can be detrimental. Hence work smartly to increase the flow of your passive income.
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