What Is Automated Trading and How Does It Work?

Cryptocurrency trading is not for the faint of heart. It can be an extremely volatile environment, and it takes a lot of time to become proficient at analyzing charts and predicting what will happen next. However, some have found a way around this through automated trading.

Automated trading allows investors to make trades based on certain predetermined conditions without doing all the work themselves. The downside? They usually need a significant amount of money to invest in these types of systems – but they also don’t have to put as much work into getting started with automated trading as somebody who is going at it alone would have to! 

What Is Automated Trading?

Trading is the process of buying and selling an asset. One can do this manually or via automated trading.

Automated trading refers to the process of placing orders on electronic exchanges through pre-programmed software. Automated trading has increased trade volumes by allowing computers rather than humans to create buy and sell orders.

An automated trader is a program that does this for you, either through signals or by executing orders based on your pre-defined strategy. The idea behind using one is that it will free up time for other things while still allowing you to trade successfully. The majority of traders use some form of automated trading rather than dealing with all aspects themselves.

How does Automated Trading work?

Automated trading is a method of trading that uses predetermined sets of instructions, or algorithms, to place trades without human input. This means that automated trading does not rely on human analysis or discretion. Instead, it follows a set of rules specifically designed for the financial instrument being traded and the market in which it occurs.

These rules are usually based on technical analysis indicators, such as moving averages and oscillators, although fundamental analysis can also be used. When certain criteria have been met, an action takes place: buy or sell orders may be entered into the market automatically, thus eliminating the need for human interference until someone else reviews profits and losses at the end of each day.

Benefits of Automated Trading

There are several benefits to having computers monitor the markets for trading opportunities and execute them, including:

Minimize emotions 

Automated trading systems minimize the involvement of emotions and allow for more rational decision-making. Emotions can have a significant impact on an investor’s ability to make money. If the market takes a sharp downturn, it may be challenging to maintain the required composure to continue making informed trades. It could lead to panic selling and trigger additional hostile activity in the marketplace.


Backtesting is the technique traders use to determine whether an automated strategy will work in the future based on historical market data. It involves examining all trades that would have been made using the selected rule over a specific period to create backtesting reports. A decision can then be taken about whether or not it is worth applying this automated trading system in real-time trading.

Maintaining discipline

Discipline is often lost due to emotional factors. Automated trading ensures that discipline is maintained even when the market moves against your positions. For example, instead of deciding to hold a losing position for a more extended period in the hope it will recover, an automated trading system might move the stop loss by a small amount on each new bar and ensure that you get out of your trade with minimal loss. This process continues until you reach breakeven or make a profit.

Diversify trading

By using automated trading, traders can diversify their investments across multiple strategies. Automated trading can provide traders with a more stable form of return on their capital when employed correctly. Automated trading also allows traders to invest in times of the day when they cannot monitor their investments.

What to look for in Automated Trading software?

Some of the best-automated trading platforms share a few common features as listed below:

Access to your preferred markets

The automated trading platform you choose should provide access to all markets you are interested in trading. This means that you should be able to trade all of your favourite assets for the greatest possible variety in terms of market exposure.

Platform capabilities

Your automated trading platform should offer various features, including charting tools, news feeds, customized alerts, and other options. Many providers offer one-click trading capabilities, while others allow you to write your own custom scripts for complex trading strategies. The more flexible your platform is in terms of customization, the greater its potential value will be if you develop sophisticated trading algorithms or embark on extensive research efforts into new areas of interest.

Detailed price histories for backtesting

The price data provided by your automated trading platform should cover sufficient historical periods for backtesting efforts. Among other things, this means that you need to be able to use a product that provides detailed price histories going back at least one year. More extensive data may be helpful or necessary for some markets, such as commodities, including gold or oil, even if your primary focus lies elsewhere.

Reduced latency

When you use an automated trading platform, there could be a lag between your price quote, the transaction, and the completion of that transaction. To help minimize this lag, look for a platform that offers reduced latency. Data feeds should update at least every few seconds to reduce the likelihood of latency problems.

Multiple order types

Your automated trading platform should offer real-time quotes on at least several different order types, including market orders, limit orders and stop-loss orders. Advanced traders may be especially interested in using conditional orders, which can allow you to automate your strategies by setting parameters such as stop-loss levels or entry/exit points before initiating a trade. If those are among your primary interests, you may also want to consider more complex order types associated with options arbitrage or fixed income products.

Accessibility from multiple locations

If you are not always able to access your automated trading platform from a single location, look for a system that is accessible from multiple platforms. This includes mobile access, which can help you reach your programs even when you are on the go.

The Bottom Line

People are always looking for ways to make money. There’s a saying that goes, “Those who can’t do, teach.” The same is true with trading crypto markets. If you cannot trade profitably on your own, then it might be time to automate your trades and let the machines take over.

Automated trading platforms like Mudrex will allow traders of all experience levels to get in on the action without sacrificing profits or risking their investments by giving up too much control. These bots take care of trading without any manual intervention required. Mudrex is easy to use, offers profitable solutions at a low fee, and is entirely secure.

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