From swing trading and scalping to proprietary trading, there are different ways forex and stock traders can achieve success whether they are full-time traders or not. But among these types of trading, the one that has caught the attention of most is day trading.

When done properly, day trading can become a lucrative source of income, but navigating the way can be a bit challenging, especially for beginners who are learning the ropes, which is why automated day trading is gradually becoming a thing of interest to both new and experienced traders. But before you go into it, there are some things you need to know about automated day trading software and if it is the best for you.

What is Day Trading?

Day trading involves buying and selling assets, whether stocks or currency pairs, within a short period of time to within a day. Day trading is highly risky because it relies heavily on price fluctuations and the volatility of the financial market for profit-making. Day traders typically make small profits on the asset because they are not holding it for a long time, but they can trade the same stocks or currency pair multiple times in a day and compound on existing gains.

Despite the risky nature of day trading, there is a reason why traders go for it regardless. It is a great way to make quick profits, and there is a feeling of satisfaction when you become successful in something like day trading that has a lot of odds stacked against the day trader. Plus, it is relatively easy and free to become a day trader by joining any of the free broker platforms, owning a laptop, and having a stable internet connection.

Most day traders are independent, and their profit-making ability is completely based on their skills and the amount of time they give to it. This way, they can constantly challenge themselves to hit new profit targets and possess all the necessary data to review their strategies. However, there are several obstacles a day trader has to overcome to become successful. They may have to pay taxes on the profits earned apart from the commissions received by the broker platforms, and someday traders take action based on their emotions and lose their money. This level of risk and the presence of emotions influencing trades is one of the reasons most traders seek to automate their trades.

Defining Automated Trading

Also known as robotic trading, Expert Advisors (EAs), program trading, or black-box trading, automated trading requires the use of software to make trades for the person running the program. The person creating an EA needs to have a trading strategy that can be broken down into a series of steps that can be effectively programmed. Also, the creator of the software must have extensive knowledge of trading and good programming skills because a trading software will only take action based on parameters or rules that were used; this is one of the differences between manual and automated trading.

This trading program or algorithm may also include some technical indicators into its trading strategy or customize some tools specifically for the program. But if you have an excellent trading strategy, you can always work closely with a programmer to create software that takes everything you want into account.

In addition, most automated day trading software is not free and may need to be updated from time to time to reflect changing market conditions and give the day traders buying this software a chance to stay on top of the trend. However, it is crucial to get updates provided by the creator of the program or other experienced EA programmers because getting an update from someone who has little to no knowledge of how it works will reduce the possibility of success and probably result in more losing trades.

Another thing to know is that not all EAs will produce good results when day trading, even when the creators are successful day traders, and you need to be cautious before purchasing despite what the marketers may tell you about the program. Since most of the process is automated, it takes some of the burden of day trading off your hands, but you may need to monitor it to ensure because successful traders who use automated software tend to be fully involved in the process to test their strategies to make sure that they are making winning trades and protecting their profits from unexpected market situations.

One final thing to note is that this automated trading software does not mean the process of day trading is fully automatic. To use the software successfully, you need a certain level of skill, knowledge, and experience to know when to continue or stop the program to protect your profits.

Advantages of Automated Day Trading Software

There are several reasons why day traders favor EAs for their trading activities. The advantages of using automated trading software include:

1. It provides a means to test your strategy

The computer running the program doesn't make any guesses and makes the trades based on the strategy or rules that were used to make the software—using market data to test your strategy before live trading helps to determine how profitable your strategy is and whether or not it can be followed without any issues.

Successfully testing your strategy gives you a chance to fine-tune your plan and show you what is needed to make trades based on the existing market conditions.

2. Minimizes the possibility of emotions affecting your trades

Humans are emotional beings, and you cannot take the emotions out of the human when trading. Our emotions make us hold out on losing trades and pull out on trades that have potential because of market fluctuations. Fortunately, computers and software don't have emotions and execute orders when all the parameters for making a trade have been met, leaving little room for traders to hesitate or question trades. However, it doesn't completely remove the place of emotions in trading, as day traders can intervene prematurely by manually overriding the trade as soon as it reaches their price target or stop the trade due to fear.

3. Quick response to trade signals

 Trading software is quick to react to changing market situations and can make new orders when the right conditions are met. All technical and risk management tools that were incorporated in the program immediately come into play to reduce losses and protect trades. If the market is changing in a way that can negatively affect trades, the computer can pull out of trades, and being able to make good decisions regarding trades in seconds can make all the difference in the outcome of your trades.

4. Allows traders to use different strategies

 Using automated trading software creates room to implement different strategies and use different trading accounts. This helps to spread the risk across different trades and increase your trading ability. Plus, doing this on your own may take weeks or months before you can effectively manage multiple trading accounts, but an EA can create multiple accounts in seconds and successfully manage them all.

Disadvantages of Automated Day Trading Software

Although it is an automated means of trading, there are several things that can go wrong when using day trading software. Some of these issues are:

1. Technical Issues

 Regular attention is required when using trading software because of the technical issues that may occur. For instance, your trade order may not be executed when there is an unstable network, and there are several other issues that may pop up when trading if you purchase the software.

2. Automated software works for a short period

 The market changes regularly, and the software does not change with it unless it's updated. This means that the software will remain mostly profitable as long as the market situation becomes stable. To maintain your software, it is necessary to have adequate knowledge of how it works, intervene in trades when needed, and get updates regularly.

3. There are a lot of scams and bad trading software

You have to navigate through the many scams in the market before you find the software that is best for you. Some contain over-optimized trading strategies that fall apart during live trading and give you terrible results. This is why you need to take time to scrutinize every software that is brought to you and do your own research instead of depending on what others tell you. Check online sites for reviews about the software and ensure that it comes with a trial period before you fully commit to using it.

Should I use Automated Day Trading Software?

Using day trading software depends on your preference. Patient traders may prefer to stick to manual day trading and build their skills, but for traders who are quick to make decisions whether it positively or negatively impacts their trade, using this software can be a way to build discipline and know when to get in and out of trades.

Also, if you have an excellent strategy of your own, you can work together with a programmer to create a trading software and sell it to others if you want, but it is important to be careful if you're buying it.

For traders that are on the fence about this, take your time to consider your options and have a list of software you’ll like to try out before making a decision.