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Automated Trading Systems & Algos, Everything You Need to Know

Analyst Team trader
Updated 12 Apr 2024

The use of technology to locate and manage individual trades in electronic markets is referred to as automated trading or algorithmic trading. The ability to fully automate trading practises via rule based systems allow you as a trader to immediately execute your entire trading plan without having to interact with the market manually. The removal of the human element and emotional trading from the picture can be a definite advantage, when the right oversight is applied.

automated trading

You want to know how automated trading systems work, and how to find the best one for you? This is your guide.

With automated trading, traders and investors can precisely encode the rules of entry, exit, and money management into an automated trading system that allows computers to run and monitor trades.

One of the most appealing aspects of strategy automation is that it can remove some of the emotion from trades by automatically placing trades when certain criteria are met. Here we will introduce you to automated trading systems, how they work, whether they work at all, and the benefits and drawbacks in using the system.

What is Automated Trading?

Automated trading systems, also known as trading management systems, trading bots, algorithmic trading, automated trading, or system trading, enable traders to programme specific rules for trade entry and exit that can then be executed automatically by a computer.

Whether you find yourself trading in the UK, Malaysia, South Africa, Australia, or the USA, your trading algo can go with you, and execute trades in the same way anywhere in the world. Sometimes you will find likeminded individuals who come together to create their own tool, and spread the workload in creation, but you can just as well use one of the existing tools.

You will either need to set the rules yourself, or find an auto trading system that can be plugged and played with one of the approved trading software tools. If it is sounding complicated already, don't worry, there are various step by step processes that can be followed, or again you can choose an off the shelf system, or even a dedicated platform that trades on your behalf, like a robot fund manager.

Trading entry and exit rules can be simple, such as a moving average crossover; or they can be made complex, requiring a thorough understanding of a programming language specific to a user's trading platform, or the expertise of a qualified programmer.

How Does Automated Trading Work?

The use of software associated with a direct access broker is typically required for automated trading systems, and any specific rules must be written in the platform's proprietary language. Because it can operate like a robot, the tool used in this trading model is sometimes referred to as a trading robot.

A trading robot is essentially software or an application that can be installed on the platform and configured to open, close, and provide alerts automatically. With such capabilities, it is natural that traders frequently rely on trading robots to relieve them of the burden of constantly monitoring positions.

Furthermore, you can learn the trading robot programming language for a variety of purposes, such as personalising robots or developing your own auto trade software based on your own logic or trading system.

How to Automate Stock Trading

how to automate stock trading

Traders and investors can easily set their own entry, exit, and money management rules using an automated trading system, which allows computers to execute and monitor trades automatically. One of the most significant advantages of this method is that it removes some of the emotion from trading and allows for fewer mistakes because trades are automatically placed based on the criteria that we have set.

The trade entry and exit rules can be set even under simple conditions. This can be accomplished, for example, through moving average crossover, or through more complex strategies that necessitate a thorough understanding of the programming language specific to the user's trading platform. They can also rely on the knowledge of a qualified programmer.

What to Look for in Automated Trading Software

There are numerous automated trading platforms available on the internet at the moment. However, there are some common characteristics that we can look for to determine which one is best for us in order to separate the good from the bad.

  • Accessibility

When it comes to automated software, accessibility is critical because not all automated software is available in all markets. If you're more interested in forex trading, for example, MetaTrader 4 is a great tool to have. You must ensure that you know what your preferred securities are in order to make the best decision.

  • Low Latency

When using an automated trading platform, there may be a delay between your price quote, transaction, and completion, disrupting your trading experience. The best automated trading system should provide you with the smoothest price quotation, which means they can protect your investments while also providing you with the same market access as a floor trader with the least amount of latency possible.

  • Language of Programming

If you want to use a more unique and complex strategy, you may have to programme it yourself. Different types of industrial programming languages are used by different trading platforms. One of the most important criteria to consider when selecting your desired trading platform is the programming language.

  • Back Testing with Detailed Price Histories

As investors, we all know how important price charts are for performing back tests, so make sure the platform you select has detailed back testing that can be used across multiple timeframes.

Automated Trading Software in the Market You Can Use Today

1. MetaTrader 4 (MT4)

automated trading systems metatrader

Source: Facebook

Metatrader 4 is a popular forex trading platform developed in 2015 and is widely regarded as the best forex platform for experienced traders. Many use the automated systems on MT4, or expert advisors (EAs) to execute trades, but you need to exercise caution. You can find lists of scams in this area with an online search, as the lists are constantly being updated unfortunately.

Pros Cons
Programming language Low quality expert advisors
Access to one of largest marketplace Does not offer customer support

2. MetaTrader5

MetaTrader 5 (MT5) is an improvement over MetaTrader 4 (MT4) in terms of market access to more asset classes, a more user-friendly coding language, and improved backtesting capabilities. Unlike MT4, MT5 is a multi-asset platform, which means users can trade derivatives such as shares and futures that require access to centralised exchanges.

Pros Cons
Programming language Smaller trading community than MT4
Access to one of largest marketplace Does not offer customer support
Superior backtesting capabilities

3. cTrader

automated trading systems ctrader

Source: Facebook

Spotware Systems' cTrader is a trading system designed for retail investors who want to trade in an ECN (Electronic Communications Networks) trading environment. The execution of trades, as well as the platform's extensive charting capabilities, are two of cTrader's key strengths.

Pros Cons
70 pre-installed indicators and 28 timeframes Unreliable trading bots
Can export and download charts from the platform Drastic fluctuations in stop loss order
Using cloud storage

 4. cBots

cBots in cTrader and Expert Advisors (EAs) in MetaTrader are essentially the same algorithmic trading feature used for auto trading. Because of MetaTrader's enormous popularity, you may occasionally hear the term cTrader EAs.

Pros Cons
Plug and play functionality No intuition that can sometimes help with trading
Dedicated developer community Difficult to code
Provides access to the cTrader forum, library, and consultants

5. ProRealTime

automated trading systems prorealtime

Source: Facebook

ProRealTime is intended for traders who require advanced technical analysis features such as more than 100 technical indicators, market, limit, stop, trailing stop, one cancels the other, one triggers the other, triple oders, and oblique orders are the eight types of orders. ProRealTime provides zero time constraints and by using cutting-edge market scanning tools, you can find securities that meet your investment criteria.

Pros Cons
Powerful decision support tools Expensive index and stock data
Efficient user interface Screener is not flexible
Provides quality market data

Benefits of Automated Trading

auto trading benefits

Although automated trading is a solution that is widely used by investors today, still the use of this system has its pros and cons. Here are some of the benefits investors may get from automated trading.

1. Reduce Emotional Factors

As all of the processes are done automatically, investment mistakes due to emotions can be minimised. Thus, investors can work in a more disciplined manner by any condition, even if the economy is in poor shape.

Of course, even with automated trading, investors' experience and skill is still needed to set the criteria. This ability is intended to measure the effectiveness of previous investments and learn from that effectiveness.

2. Consistent Investment Strategy

Investors can manage the investment schedule of the Automated Trading System used by setting the automated trading platform that he uses. Therefore, the investor can buy and sell securities consistently even if they are busy with other tasks at hand.

3.  Allows Short Stock Transactions

Investors can buy securities automatically based on the arrangements they have made before. Conversely, the Investor can also go out and sell his shares automatically as well. This advantage greatly helps investors in the investment process because today's stock market moves very fast and has high volatility.

4. Allows Traders to Buy Securities from Various Companies

This is to keep the trader's investment always safe because the trader has bought many securities in various companies with various risks.

Drawbacks of Automated Trading

auto trading drawbacks

1. Potential Failure Due to Technical Error

Although this automated trading can work well in the capital market, technical constraints such as disconnected internet connection remain an obstacle that must be considered so that the transaction process can be carried out smoothly.

2. Supervision is Still Required

This oversight is intended to ensure that the transactions we have made run properly and are not disrupted due to technical factors as stated in point 1.

3. Scams Can Exist If Using Third Party Tools

A huge source of frustration for anyone looking at third party trading robots is the prevalence of scams, or those that might have differing interests to your own. This is one of the reasons why MT4 had previously been removed from app stores, that it was being used nefariously. The software in and of itself was not the problem, as this has been a trusted platform for many years, but the way in which is was being used was an issue. Always exercise caution whenever you are handing over any element of control over your money, but due to the lack of regulation over the tools that are integrated, it can be work to find the right trading algo.

4. Often Lead to Overconfident Among Traders

This is because the Automated Trading System has a back testing feature, which is a feature to analyse the results of investments that have been made. This feature is clearly needed so that the investments we make in the capital market can work optimally.

However, too much reference to this feature can also lead us as investors to be too optimistic. In fact, it may be that although the back testing results are relatively good, in fact we fail in the next investment. Because investment is not only affected by data in the past but also influenced by current economic conditions and forecasts of future economic conditions.


While appealing for a variety of factors, automated trading systems cannot be considered a substitute for carefully conducted trades. Mechanical failures can occur, and therefore, the system requires monitoring. As an investor, you need to equip yourself with fundamental trading strategy, as well as automated trading strategy to minimise the risk involved in using the automated trading platforms.

Ultimately, financial markets provide investors with a high risk of losing money rapidly. Hence, it is your crucial responsibility to trade with the right amount of knowledge and remember to choose the best trading platform that fits your trading journey.


It depends on how traders and investors are using it, but there are certainly people and businesses making substantial profits with automated trading.

The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.