In today’s digital age, the concept of automation is synonymous with progress.
Automation helps bring about efficiency, speed, and mechanical accuracy. But automation can also be harmful and destructive when used in the wrong context or when automated parameters and rules set incorrectly. The key to succeeding in using automation is determining if you really need it, what you are using it for, and understanding its risks and limitations.
If you trade the markets, automated trading platforms can be as helpful as destructive.
The “quality” of the platform makes little difference if you are using automated platforms incorrectly. It’s not a matter of finding the best automated trading platform but applying best practices when engaging automated technologies.
There are two ways to use automation in a trading environment.
Full Automation: A fully-automated trading platform does all the trading for you. If it’s a good platform, it will analyze the market for you, identify trading opportunities, adjust the risks, and execute trades without you having to control it. Sometimes it will do this on a 24-hour basis. It can save you time, it can help prevent the jitters that often happen before trades, and it can trade with a mechanical precision that makes up for your efforts in staying alert, disciplined, are error-free.
But of course, these technological features will not guarantee your success. Automated trading platforms execute a coded trading system or strategy. It is your job as a trader or investor to evaluate the strategy that you plan on trading before you import it into your system. This can be a complicated task as there are so many parameters to assess.
It helps to speak to a professional while viewing performance metrics to determine whether a given strategy is for you. Halifax America’s Algo IQ is a good example of this comprehensive service.
Semi Automation: A semi-automated platform is essentially a trade assist. At best, it uses “smart technologies” to respond to your trading, helping you to see your strengths and weaknesses, and helping to correct your trading errors.
In many cases, semi-automation can be significantly more helpful than full automation.
In a semi-automated trading environment, you are still in full control. In addition to trading manually, your semi-automated platform does a lot of the thinking work for you, adjusting your risk, stating the probabilities of a given opportunity based on your rules and parameters, and presenting you with a list of potential trades which you can either select or decline.
Semi-automation is a like having an assistant, but one who can think faster and more accurately than you; one who is quantitatively smarter, and who can help point out opportunities and identify your mistakes.
Here’s an infographic that illustrates some of the complex decision work that a semi-automated system can do for you:
Whether you want a trading platform to do all the work, or assist you while you take control of the wheel, it’s important to know the differences between both and the potential and risks they offer.
If you would like to talk to a professional to find out which kind of automation might be better for you, contact us at firstname.lastname@example.org.
The information presented in this blog is strictly for educational purposes only. Halifax America LLC doesn’t necessarily endorse the information provided. We present this information to our readers with the expectation that they will critically read and evaluate the information themselves. Halifax America LLC is NOT recommending trades or investments in relation to the information presented. The risk of loss in the trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial and is not suitable for all investors. Trading on margin or the use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Supporting documentation is available upon request. Trading futures, options on futures, and forex involves substantial risk of loss and is not suitable for all investors. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.