By Justin Kuepper
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Trading systems are simply sets of rules that traders use to determine their entries and exits from a position. Developing and using trading systems can help traders attain consistent returns while limiting risk. In an ideal situation, traders should feel like robots, executing trades systematically and without emotion. So, perhaps you've asked yourself: What's to stop a robot from trading my system? The answer: Nothing! This tutorial will introduce you to the tools and techniques that you can use to create your own automated trading system.

How Are Automated Trading Systems Created?
Automated trading systems are created by converting your trading system's rules into code that your computer can understand. Your computer then runs those rules through your trading software, which looks for trades that adhere to your rules. Finally, the trades are automatically placed with your broker.


This tutorial will focus on the second and third parts of this process, where your rules are converted into a code that your trading software can understand and use.

What Trading Software Supports Automated Trading Systems?
There are many trading programs that support automated trading systems. Some will automatically generate and place trades with your broker. Others will automatically find trades that fit your criteria, but require that you place the orders with your broker manually. Moreover, fully automatic trading programs often require that you use specific brokerages that support such features; you may also have to complete an additional authorization form.

Fully Automatic Semi Automatic
TradeStation AmiBroker
Interactive Brokers Tradecision
WealthLab

Advantages and Disadvantages
Automated trading systems have several benefits, but they also have their downsides. After all, if someone had a trading system that automatically made money all the time, he or she would literally own a money making machine!

Advantages:
  • An automated system takes the emotion and busy-work out of trading, which allows you to focus on improving your strategy and money management rules.
  • Once a profitable system is developed, it requires no work on your part until it breaks, or market conditions demand a change.
Disadvantages:
  • If the system is not properly coded and tested, large losses can occur very quickly.
  • Sometimes it is impossible to put certain rules into code, which makes it difficult to develop an automated trading system.
In this tutorial you will learn how to plan and design an automated trading system, how to translate this design into code that your computer will understand, how to test your plan to ensure optimal performance and, finally, how to put your system to use.


Next: Trading Systems Coding: System Design »

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