An automated trading system, also referred to as a mechanical trading system, is a set of trading rules, which will give you your entry points and your exit points automatically. The basis for exit and entry points is generally based upon moving averages, oscillators, and any additional technical indicators.
The automated trading system will also search for exact patterns of pricing, and it will also look for proximity of market key price levels. Usually, you would want your automated trading system to use a mixture of the above mentioned indicators. The following would be a good example to set our automated trading system for: We would want the automated trading system to buy if the 20 period moving average crosses over a 50 period moving average and the stochastic indicator is fewer than 20.
Once your list of rules is coded into a full system, you instruct your trading platform to trade the system on an automated basis. The system will from this point on, automatically place all of the buy / sell orders into the markets.
The point to using an automated trading system is to try and minimize human emotion during the trading process. This is a very important...
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