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The Evolution, Rise & Future Of Automated Trading System



Automated Trading System

With technical innovation, the trading system has become more sophisticated and advanced. If you work in the buying and selling industry, you must be aware of the implications of automated trading.

Automated trading is also know as algo or black box trading. These trading systems use various algorithms to do the split-second and help you get the best return on investment.

If you want to know what the future of trading will be? Continue reading the post to know from where automated trading began and where it will go in the future. 

What is Automated Trading?

Automated trading is the way of trading where you use the power of technology for trading. For example, robots or bots can help you sell and buy specific stocks, goods and services and more. 

Automated trading is known as algorithm trading and can be used for various purposes. It includes swing trading, market making, and arbitrage. You can also trade diverse assets like stocks, Forex, future, and crypto.

One key advantage of automated trading is that it removes sentiment from the calculation. Humans act impulsively and base their decisions on solid emotions like fear and greed.

But this is not the case with robots. They work on pre-set rules and follow the instructions you set for them without any emotion. Hence, they help you to make more rational decisions than humans.

Want to achieve your investment goal in a short period of time?

Look at our list of best stock trading apps that will automate your overall stock transaction.

How Automated Trading Came Into Being?

Before moving forward to the future of automated trading, let’s see how it came into being and became so valuable for traders. 

Richard Donchain was the one who developed the idea of automatic trading in 1949. It was the first time he had used various sets of rules for purchasing and selling assets on the financial market.

Then, in the 1980s, this rule-based trading technique gained popularity among traders, particularly after being used by renowned trader John Henry.

The updated version of the automated trading system was finally made available for purchase in 1990. Now, retail investors have access to this advanced trading technique in the trading arena of the financial markets. 

Currently, an automated trading system handles all trading assets around the world

Now that you know the journey of an automated trading system, let’s move forward and learn how it works. 

How Automated Trading Works?

The automated trading system is quite logical and easy to understand. It is completely based on the commands, instructions, and parameters the buyers and sellers set. Now let’s understand the working process of automated trading step by step. 

  1. For the automated trading system to work, first, you will choose the platform as per your investment perspective and set precise entry, exit, and investment rules into the system. 
  2. The rule you set on the platform will be based on various market conditions, such as the trade time, the price at which entry and exit positions will take place, and the trade quantity.
  3. You can also set the rules through complicated strategies through external factors or investments in other asset classes.
  4. When the rules are configured, the algorithm in the system will execute the transaction on the trader’s behalf each time the requirements are met. 

For example, algorithms may automatically enable an automated stock trading system to buy 200 shares of Apple if its 100-day moving average crosses over the 250-day average.

Now you know how the automated trading system works, let’s move forwards to learn how technology has accelerated automated trading in the 21st century.

You may also like: Can We Trade Stocks As A Home Business?

The Adoption of An Automated Trading System

Technological advancement has significantly increased the adoption of automated trading systems in the 21st century. Right now, there are two popular trading methods embraced by retail investors. Let’s take a look at those:

Trading Robots 

The automatic trading robots method enables traders to purchase and sell crypto, stocks, forex, and other financial instruments without spending countless hours conducting analysis. This tool helps to assess the profitable setups in the market and then use them to execute trades mechanically on your behalf.

Although trading robots are only partially labor-free, they can simplify market profit for new traders. The trading robots Prime Bitcoin, Oil Profit, Bitcoin Era, and Quantum AI are a few examples.

Social Trading

The primary trend in the market for automated trading is social trading. And you don’t need me to explain why. You are well aware of how social media has impacted our daily life.

Social auto trading systems initially just offered copy trading. However, buyers and sellers could mimic the trading behaviour of more seasoned or successful investors by effectively linking one’s trading accounts with another.

However, in recent years, social marketplaces have placed a greater emphasis on the community and included extensive features that have encouraged trader interaction.

The Future of Automated Trading System

Knowing everything from the past to the present, we have come to our most crucial section, the future aspect. So, what does future holds for an automated trading system?

The automated trading market is growing at a CAGR of 11.23% between 2021-2026.

According to the facts mentioned above,trading appears to be automated in the future. The FinTech industry will see more innovation, significantly influencing automated trading.

And because of this, automated trading products will have a self-learning algorithm that will help traders optimize their trading system settings. Consequently, improve their performance.

Currently, trading robots are only capable of detecting technical problems related to marketing industries. However, with AI, Robots can combine technical analysis with fundamental and sentimental analysis to make wise decisions under various marketing circumstances. And makes it easier for traders to buy and sell stocks.

This is merely a drop in the ocean; thanks to constantly improving technology, automated trading offers countless opportunities like arbitrage, index funding rebalancing, trend detection ,mean reversion and more. 

Final Thought

In this blog, we learned about the history and potential of automated trading and explored how it would change how we trade today. Modern trading methods like automated trading provide more practical trading than conventional trading. Making a reasonable, business-oriented decision without relying on emotion is one of the key benefits of automated trading.

Talking about business, if you want to be discovered by millions of users, list your stock trading app on AppsHive or find the best trading apps to make your daily trading more productive and efficient. The best part of listing your app on this unique platform is that it is the most ideal platform to help increase the downloads of your app.

Jenny is a writer by heart. She loves to travel and gain new experiences. A qualified engineer at AppsHive by profession, Jenny is also a wellness specialist with many years of experience. She is someone who loves to share the learnings that she has gained in her pathway to success. Also, mental health is one of the main causes she supports, hence most of her work is in the non-fiction genre. She radiates positivity and good vibes wherever she goes.