Automated / algorithmic trading explained

Automated trading / algorithmic trading is the practice of trading shares automatically using computer programs that have trading strategies implemented in to them. This means your computer will buy and sell stock automatically following your set strategies.

You can either buy 'ready made' automated trading platforms or create your own, Visual Basic in Microsoft Excel being favorite amongst automated traders. However to create a program in Excel you must be competent in using computer programming languages.

In 2006 a third of all EU and US stock trades were automated and this figure is expected to rise to 50% by 2010. Around 60% of UK trades in 2007 were automated.

There is a reason for the massive rise in automated trading, as there are several major benefits;

• It takes the psychology out of trading, meaning there's no way of letting your losses run because you think the markets going to turn around (we've all experienced that!)
  
  
• It stops you from 'clicky finger' syndrome! Where you stop and start trades at the slightest movement in the market!
  
  
• Its automated! Meaning you turn the program on and let it run for the day meaning you can do what you want all day - pick up the kids from school, watch a bit of day time tv etc.
  
  
• You can back test your strategies using old data to see if they work before implementing them.

Automated trading allows you to trade any financial product - stocks, FOREX, options etc. You just need to connect to the right platforms and have the right accounts open.

TradeKing offer an automated service with their brokerage account that trades automatically for you, based on the expert picks from their newsletter.