What if you could take the psychological element out of trading? What if you could trade without becoming a victim of your own emotions? The best automated trading software makes this possible.
Computers have given traders the power to automate their moves and take all the emotion out of the deal. By using automated trading software, you can set parameters for potential trades, allocate capital and open or close positions all while you sleep or watch TV.
But automated trading doesn’t mean automatic profits. There’s still plenty of risk involved, even when computers do all the work.
Quick Look: The Best Automated Trading Software
- Best Overall: MetaTrader 4
- Best for Options: eOption
- Best for Stock Trading: Interactive Brokers
- Best for Forex: MetaTrader 4
What is Automated Trading Software?
Automated trading software is a sophisticated trading platform that uses computer algorithms to monitor markets for certain conditions. A stock market trader using an automated platform can set some initial guidelines for equities, such as volatile small-cap stocks with prices that recently crossed over their 50-day moving average.
Traders also set entry and exit points for their potential positions and then let the computers take over. The automated software can screen for stocks that fit the criteria and execute trades based on the pre-established parameters.
Some of the benefits of automated trading are obvious. Human beings are limited in the number of stocks or currencies they can monitor at a given moment. We only have two eyes, right?
On the other hand, computers can look through different markets and securities with a speed incomprehensible to flesh-and-blood traders. Algorithms can spot a trend reversal and execute a new trade in a fraction of a second.
Automated strategies only work in specific market conditions — they aren’t universal and you’ll need to understand when to deploy them. Additionally, many automated strategies become over-optimized and fail to account for real-world market conditions. Remember, all the backtesting in the world can’t make any one strategy foolproof.
Pros of Automated Trading
- Fast trade execution
- Sticks to a predetermined strategy and doesn’t deviate
- Removes stress and emotion
- Lower transaction costs
Cons of Automated Trading
- Lack of control is difficult for some traders to accept
- Successful strategies in backtests may falter in real life
- Easy to over-optimize your strategy
- Many robots or expert advisors have questionable success rates
What to Look for in Automated Trading Software
The best automated trading platforms all share a few common characteristics. Keep these features in mind as you choose.
Access to your preferred markets. Automated software doesn’t mean you’ll have access to all markets. For example, MetaTrader 4 can only be used to trade forex products. Make sure you can trade your preferred securities.
Functional interface. Yes, the computers do much of the heavy lifting, but automated platforms still need to be managed (and adjusted when needed). Choose software with a navigable interface so you can make changes on the fly.
Industry standard programming language. If you really want a unique strategy, you’ll need to program it yourself. Programming language use varies from platform to platform. In the case of MetaTrader 4, some languages are only used on specific software.
Detailed price histories for backtesting. Charts are critical to performing backtests, so make sure your platform has detailed backtesting that can be used across multiple timeframes.
Our Picks for the Best Automated Trading Software
Benzinga has selected the best platforms for automated trading based on specific types of securities. Different categories include stocks, options, currencies and binary options.
No matter what type of trader you are, be sure to understand what you’re buying. As we previously mentioned, automated trading isn’t a golden ticket. You can make money while you sleep, but your platform still requires maintenance.
Best Overall – MetaTrader 4
Few pieces of trading software have the power of MetaTrader 4, the popular forex trading platform from Russian tech firm MegaQuotes Software Inc. MetaTrader 4 was released in 2005 to much acclaim and quickly became the forex platform of choice for experienced traders.
MetaTrader 4 could be integrated into almost any brokerage account, allowing users to harness the platform’s capabilities without forcing them to open new accounts. The platform runs on its own programming language, MQL4, which is similar to popular programming languages like C.
Additionally, MetaTrader 5 allows clients to trade in markets other than currencies but uses its proprietary programming language called MQL5. Since MQL4 and MQL5 aren’t compatible, many users have chosen to remain exclusively on the MetaTrader 4 platform. If currencies aren’t your thing, you won’t find much use for MetaTrader 4.
Expert advisors might be the biggest selling point of the platform. These programs are robots designed to implement automated strategies. You can purchase EAs from the MetaTrader Marketplace or write your own using the MQL4 programming language.
Best for Options Trading: eOption
eOption was created in 2007 and specializes in low-cost options trading. eOption has some of the lowest commissions in the options trading space at only $0.15 per contract and $3 per trade.
But it’s not just for options anymore. eOption clients can trade stocks and ETFs for $3, mutual funds for $5 and bonds for as low as $3 ($5 for the first 25 bonds).
eOption also lets users set up automated trading systems, but there’s no programming language knowledge needed. Instead, eOption has a series of trading newsletters available to clients.
Clients can choose a newsletter to follow and the automated trading desk will execute trades from your specific newsletter.
Note that trades that go through the Auto Trade Desk are subject to a higher $5 commission and your account cannot deviate from the newsletter’s trades after you enroll in auto trading. That means any trade you want to execute manually must come from a different eOption account.
Best for Stock Trading: Interactive Brokers API / FIX CTCI
Interactive Brokers is a global trading firm that offers brokerage services in 31 different countries. Users can access 120 different markets, from equities to bonds to currencies.
New traders will find plenty of educational materials about different products, markets and strategies through its Traders University. Experienced traders can play around with automated systems using Interactive Brokers’ API solutions.
Interactive Brokers API allows users to build their own automated trading systems using popular programming languages like Java, Python and C++. You can connect your program right into Trader Workstation.
For even more sophistication, the FIX CTCI solutions enable super-fast trading by leveraging Interactive Brokers’ high-speed order routing.
Trades are executed at the best possible prices, but you’ll pay extra for this service. Required commission minimums for FIX CTCI are $1,500 per month.
Best for Forex: MetaTrader 4
While MetaTrader 5 can be used for all types of securities, MetaTrader 4 is strictly for forex trading. But the collection of tools here cannot be matched by any other platform.
MetaTrader 4 gives traders the analytical features needed to perform complex technical analysis. Backtest your strategies through 9 different time periods using 30 unique technical indicators.
MetaTrader 4 also supports copy trading, so novice traders can simply imitate the portfolios of their favorite experts.
But MetaTrader 4 is famous for Expert Advisors (EAs), algorithmic robots capable of automating your trading operation. EAs can be purchased on the MetaTrader Market.
Over 1,700 different robots can be acquired on the MetaTrader Market, but tech-savvy traders can write their own unique EAs in the MQL4 programming language. If you create your own EA, you can also sell it on the Market for a price.
Don’t have the cash to buy robots? MetaTrader 4 comes fully loaded with a library of free robots.
Make Your Choice
Automated trading software can simplify your life in a number of ways, but it’s still critical to learn and understand why trades are being made. Even the most sophisticated automated system will need maintenance and tweaking during certain market conditions. As you make your choice, be sure you keep your investment goals in mind.
What types of securities are you comfortable trading? How much capital can you invest in an automated system? The computers might do the trading for you, but you’ll be the one who feels pain if things go awry.