An automated trading platform can search for trends, evaluate market data, and apply particular mathematical/technical formulas. These formulas generate signals – buy and sell orders – to go long or short. You can track the performance – whether hypothetical or live – in real-time, and subscribe, activate, and deactivate any automated system whenever you want.
Hence, you can trade around the clock, and you will never miss an opportunity with automated trading. The following are a few crucial things that you should check before you select an automated trading system:
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Check the Option of Backtesting
A backtest is an old simulation of an algorithmic trading strategy to determine how it would have worked on the past data. The results of the backtest usually show the performance of your strategy in terms of profits and losses.
You will also know about some well-known performance statistics, like Information ratio or Sharpe Ratio. These will help you to count the return of your strategy on risk. After all, as charts are crucial for you to perform Backtest, ensure your trading software has detailed Backtesting that you can employ across various timeframes.
Hence a good backtesting software can be a productive add-on for your automated trading software. You can divide backtests into two categories, namely Research Backtesters’ and ‘Event-driven Backtesting.’
Check Customization & Configuration
Different automated trading systems or software offers you a built-in trade algorithm. You can also find software that has a crossover of the 50-day moving average with the 200-day MA. In this instance, being a trader, you can alter your experiment by switching to another moving average.
You can perform this only when the software permits. Choose excellent algorithmic trading software because it will offer you an option for a high degree of customization and configuration. In different trading software and systems, you can find different programs. These are like Matlab, Python, C++, JAVA, and Perl as the common programming languages.
However, a sound trading system will have the option to write your custom programs. It allows you to justify any trading concept you plan to develop. So, a good algo or automated trading system will offer you to code in the programming language of your preference.
Look for Efficiency
The trading software you choose should offer you enhanced order speed entry. The software should have the capacity to automatically change to market conditions and produce the orders when your trade criteria are fulfilled.
In the trading world today, only a few seconds can make a big difference to your possible win or loss. The timing will stop you from reaching the profit target before you succeed in entering an order. So, ensure that the automated trading platform you pick offers you speed in trading.
Different automated trading software offers you access to trading/backtesting of specific securities only. You need to ensure what the automated trading software offers you and then decide based on your requirements.
Don’t forget to take into consideration the frequency of data that you would need. Some of your trading strategies may require daily EOD data, while other strategies may need intraday trading data.
Easy to Use and Flexibility
Different automated stock trading software varies in ease of use. Some software may require you to have programming expertise, while other software may be simple and don’t need any coding. Before you finalize any software, make sure that you check the demo version. It will help you decide what fulfils your comfort level.
The difficulty level of platforms can be dissimilar for varied assets you trade. Look for the other tools & features available in the software to examine the specific asset class. Moreover, go for software that offers you analytic functions with interactive and customizable charts and many technical indicators.
Number of Strategies Your Software Allows
At times there can be restrictions on the number of long or short strategies you can load on a specific account. Hence, you may need additional accounts for more strategies. Also, find out if you have sufficient memory on your computer to run multiple accounts. After all, accounts can be memory-intensive.
Is Trading Software Safe?
As there is a lot of automation going on in the trading world, you may risk losing all your important data in case of failures. So, ensure that the automated software you pick offers you a useful and advanced risk management feature for your data.
To sum up, before you invest in an automated trading platform, make sure you tick mark all the discussed check-points. And stay patient as you use a trading platform because it takes significant discipline, research, and time to be consistently productive at trading.