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What are the Best Tips for Automated Stock Trading?

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  • Written By: Bobby R. Goldsmith
  • Edited By: Susan Barwick
  • Last Modified Date: 26 November 2016
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An automated stock trading system removes the unconscious subtleties of human bias from the management of the investor's portfolio, but not all automated stock trading systems are created equal. A good tip for using such a system is to be sure to get one that analyzes other markets and that allows constant access to world markets. Also, an automated system should not be unsupervised and should be thoroughly understood by the user.

One of the best tips for selecting an automated stock trading program is to look for one that features the ability to analyze ancillary markets. While the cutting edge programs feature this, there are a number of automated systems that do not, and an investor will miss out on comprehensive, ongoing analysis of the world's financials. Some automated systems will only compile data from the indicies that are directly related to the positions held in an investor's portfolio.

An investor should use an automated stock trading system that issues purchase and trade orders through pre-programmed algorithms. The full potential of automated trading cannot be realized if the investor still manually initiates every action for the portfolio. A key strength of a computerized system is that trades can be made automatically without any negative impact from hesitation or deliberation on the part of the investor.

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Another tip for maximizing the potential of an automated stock trading program is to allow it 24-7 access to world markets. The best trading positions, especially for investors involved in global exchanges or in commodities, often occur during non-business hours. A helpful feature of automated trading systems is the ability to recognize emerging patterns that will dictate a buy or sell action and follow through on that action without having to wait for the investor to examine the situation.

That being said, a good tip for ultimate success is for an investor to never let an automated system have complete control over the portfolio. Computerized systems are not plug-in-and-forget systems that can fully manage a portfolio. Automated trading algorithms are effective for purchasing positions at a predetermined price and for selling positions at the most likely point of maximum profit or when a danger signal is found. Still, an investor needs to analyze the trade orders of the system to ensure that the system is performing at its best.

A useful tip is to read through all of the material related to the system. The readme.doc file included with the software should cover everything that an investor will need to know about the implementation and operation of the software. Also, if there are any tutorials for the program, an investor should go through each one prior to initiating any financial activity.

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