- What is Automated System Trading?
- What is Strategy?
- 5 advantages of Automated System Trading
- 3 disadvantages of Automated System Trading
- How a Automated System Trading is consisted of?
- 6 things you must check before choosing a strategy
- 5 things to keep in mind when choosing a signal
ZuluTrade is an Copy trading platform provider, where investors can copy traders from signal providers for free.
By using ZuluTrade’s copy trading platform, Forex orders are directly copied to your live trading account in real time.
This article focuses on the strategies of signal providers on ZuluTrade, especially the signals which utilize Automated System Trading, or so called EAs (Expert Advisers).
Is Automated System Trading great and recommended for investors?
Find out more in this article.
What is Automated System Trading?
Automated System Trading is a method of trading in the FX market, which is used by many investors as a method of trading mechanically according to pre-established trading rules.
In Automated System Trading, there is no particular market view in each market situation, and trading is done mechanically based only on preset trading rules.
Therefore, you can also automate series of investment actions.
Some people interpret Automated System Trading as synonymous with Copy Trading.
In addition, a trade in which an investor himself makes an investment decision and places a buy/sell order is called a discretionary trade.
ZuluTrade is a Copy trading platform provider where investors can copy traders of signal providers.
There are many ZuluTrade’s signal providers with different trading strategies.
What is Strategy?
Automated System Trading consists of a platform that performs systole and an automated trading program that runs on that platform.
This automatic trading program is called “Strategy”.
Each strategy is programmed with the goal of making a profit with FX.
Automatic trading is possible by running the program on the specific trading platform.
For example, with ZuluTrade’s service, you select the strategy to run on the system and set the investment amount.
After that, automatic trading of FX is performed according to the conditions programmed in the selected strategy.
Since the strategy of Automated System Trading basically determines the trading signal by technical analysis, when the conditions set for each strategy are satisfied, a market order is placed to open a position or settle the held position.
5 advantages of Automated System Trading
There are five advantages that can be obtained by Automated System Trading.
1. Always monitoring opportunities 24 hours a day
Basically, it is a merit of FX that there are trading opportunities almost 24 hours on weekdays, but that does not mean that investors can participate in trading 24 hours a day.
With Automated System Trading, you can always watch the market price and activate orders, so you can buy and sell almost 24 hours.
2. Stress-free without having to think for yourself
Not only FX, but investment involves a lot of work such as market analysis and risk management.
While this can be a burden for investors, Automated System Trading is a fully-automated task, which saves a lot of effort.
Also, in discretionary trading, the mental burden such as stop loss is unavoidable, but Automated System Trading does this kind of work automatically, so you can be freed from the loss cutting stress every time.
3. You can have an excellent “investment brain” on your side
For those who want to start Automated System Trading, doing better with Automated System Trading than you do manually, is a big purpose.
Investors themselves can use the “investment brain” such as strategies with excellent investment performance and strategies created by professionals.
This will be a reliable merit especially for those who are new to FX.
4. You can choose a strategy with excellent operational performance
Which strategy you choose determines the success or failure of Automated System Trading.
For this reason, the Forex companies that provide Automated System Trading Service have enhanced the easy-to-select mechanism by providing strategies by professionals and displaying real-time results in ranking format.
The service of Automated System Trading for the past few years has made it easier to choose a strategy, so it is a big advantage to be able to choose an excellent strategy.
5. You can execute “Stop Loss” without hesitation
A major contributor to the large losses experienced by many investors is the hesitation and delay of loss cuts.
Humans feel a great deal of resistance in fixing the loss by their own operations, and it will be more burdensome for FX beginners in particular.
Cutting losses are included in Automated System Trading as it continues to trade consistently according to predetermined rules.
This makes it easier to avoid the large loss caused by the stop loss delay.
Among signal providers of ZuluTrade, there are many Automated System Trading and you can verify them by referring to their profile and past data.
3 disadvantages of Automated System Trading
There are 3 possible disadvantages of using Automated System Trading.
1. The contents of the trading program are black boxes
Automated System Trading service is to issue trading signals and place orders by technical analysis.
How to analyze and issue the trading signal is a trade secret of each strategy, so it is basically impossible to know the contents.
2. Response to important news tends to be delayed
The exchange rate is fluctuating due to two major factors: technical and fundamentals.
Automated System Trading usually make technical decisions based on technical analysis and do not consider fundamental factors.
When the market changes suddenly due to big news such as President Trump’s remarks and British Brexit, the response tends to be delayed, and tactics such as riding on a large market due to fundamental factors are not good.
3. Might not make profit in a short period of time
It is an opportunity to make a profit when there is a large price movement such as a so-called large market price, but many Automated System Trading make trades in a short period of time because the basic stance is to repeat the trading in small increments by the technical analysis and accumulate the profit.
However, it can be said that this is good at risk management, so there are parts that cannot be said to be disadvantages.
In case of ZuluTrade, you can choose from hundreds of signal providers which include both discretionary traders and Automated System Trading.
When using ZuluTrade’s service, you are recommended to use AAAFX’s live trading account. Open an account with AAAFX to get the maximum benefit.
How a Automated System Trading is consisted of?
An Automated System Trading gives trading signals mainly by using various technical analyzes such as moving averages, Bollinger bands and Ichimoku Kinko Hyo.
Strategies of Automated System Trading have different values and analysis methods so that investors can make different investment decisions even if they look at the same technical indicators.
It is basic to choose a strategy with good results, but since you deposit your assets in a strategy that performs automatic trading, it is not possible to know what indicator the strategy is trading with and what kind of character it is.
Strategies of Automated System Trading is mainly composed of the following elements, and it is necessary to select and set these items when starting trading.
- Trading currency pair
Each strategy has a currency pair with which it can trade. As you know, there is a characteristic in the price movement depending on the currency pair, but even if you use the strategy for automatic trading, the tendency is similar, so choose the currency pair according to your investment policy.
- Investment quantity
Set the trading volume per transaction performed by the automatic trading program. Generally, it is set in Lot units, and 1 Lot is often 100,000 currency units, but in 100,000 currency units and 10,000 currency units, there is a 10 times difference in the funds required for the account, so make sure you set the volume correctly.
- Risk allowance
Loss can occur even if you trade using an automated trading program. By setting how much you can tolerate that loss, when the set amount is reached, the position will be automatically closed and the stop out will be triggered.
- Maximum number of positions
Set the maximum number of positions you want to hold when the strategy you are planning to adopt gives a trading signal. It will be decided in consultation with the financial margin, but it is safe to keep it small if you have not experienced automatic trading with that strategy yet. Depending on the market price, multiple trading signals may occur in a short period of time. If you set the maximum number of positions a little higher, you will have multiple positions at the same timing.
With ZuluTrade, you can set up parameters easily on ZuluTrade’s platform.
ZuluTrade also offers a demo trading account which you can use virtual funds and copy real signals.
6 things you must check before choosing a strategy
Here, we have 6 strategies when choosing a trading signal, which should be clarified before starting the operation of Systole.
1. Required initial investment funds
First, let’s check the investment funds needed to start Automated System Trading.
The amount of funds required for each currency pair is often calculated using the formula “Required margin amount x maximum number of positions + maximum draw-down in the last 6 months”.
The draw-down represents the amount of decline during operation, and the maximum draw-down shows the largest unrealized loss recorded during the specified period.
Knowing the maximum draw-down of about half a year, you can see how far the strategy of Automated System Trading can carry losses.
If you start Automated System Trading with the minimum quantity, it is even possible to start from less than 100 USD.
But even if the trading quantity is small, if the unrealized loss expands, it will be a a large like the discretionary trade.
In case of ZuluTrade, the required minimum deposit amount also depends on the broker you choose.
2. Short term trade? Long term trade?
There are differences depending on the nature of the user, investment policy, financial circumstances, and whether to aim for short-term profits or for medium- to long-term profits.
There are various types of strategies, ranging from those aiming for profit in a short-term span to those with a long-term perspective, so choose the one that suits your personality and investment policy.
Looking at the profit and loss graph, the strategy is different between the strategy that repeats increasing and decreasing in the short term and the strategy that continues to increase gradually, so check the profit and loss graph and find the strategy that suits you.
The performance of signal providers of ZuluTrade are also clearly shown in a graph and you can see through the whole past performance.
3. Strategy and Tendency of signals
There are various types of investors, such as those who are good at following trend and those who like high risk and high return investment.
Similar to this, the strategy of Automated System Trading is also classified by trade type.
For example, many signals of the well-known Automated System Trading platform, ZuluTrade has three categories: low risk type, balanced type, and trend type.
As you can guess from the name, these categories are categorized according to the number of recent transactions and revenue, maximum draw-down, win rate, etc.
What you want to pay attention to here is that it is evaluated and classified based on the result of the trade, not the operation policy given when the strategy was developed.
Depending on the result of the trade, it may be classified differently from the original intention of the strategy development, but the user can search the strategy by objective information of the trade result.
4. Is the maximum draw-down updated?
In most cases, it can be said that the strategy in which the maximum draw-down is updated many times for the last year has slow performance.
Even if it has a good performance in the past, it is risky if the recent operation results are not good, so it is safe to not select.
On ZuluTrade’s platform, you can also see the comments made by the strategy providers which explain how the system is performing and has been updated systemically.
5. Is profit rising gradually?
Automated System Trading is often good at accumulating profits while repeatedly buying and selling.
As a result, the profit/loss graph for strategies with excellent investment performance will gradually increase over the long term.
The results of each trading may change the shape of the graph greatly in the past, so it is good to check the performance judgment by the profit and loss graph on a yearly basis.
It is recommended to choose a strategy that gradually increases assets while repeating profits and losses.
With ZuluTrade, you can easily see how each signal is performing in the past with a graph.
6. Does Automated System Trading have experience?
Investment always comes with a loss.
It’s not that you can always win, so the basics of investment are to maximize profit while minimizing losses.
It’s the same for Automated System Trading, so if you check whether “small loss and big profit” is shown in the results, you can see the real ability of that strategy.
If the strategy has the average profit of above the average loss and at the same time the maximum profit is above the maximum loss, it is a measure to judge that it is taking profit while minimizing losses efficiently.
With ZuluTrade, you can also submit comments or contact signal providers to inquire more about the trading signal.
5 things to keep in mind when choosing a signal
Are you interested in investing in the Forex and CFD markets, by using ZuluTrade’s copy trading platform?
Here are some tips to choose the better signal provider.
1. Portfolio selection when choosing strategies
Diversified investment is the basis of risk management.
When applying it to Automated System Trading, it is effective not to let a single strategy manage all assets, but to activate multiple strategies at the same time and strategically assemble different strategies.
A portfolio is group of strategies and assets distributed to different investment targets.
Build a portfolio by selecting multiple strategies even for automated trading by ZuluTrade.
“Copy Trading” is classified according to the nature of the strategy, and it is effective to combine strategies with different personalities and operate them simultaneously.
When assembling a portfolio, what matters is the overall balance.
Even if there are a mixture of strategies that are in good condition and strategies that are not, if the total is positive, the portfolio is said to be successful.
2. Don’t leave the portfolio alone
Although Automated System Trading is automatic trading, you should be aware that full neglect is a high risk.
Once a portfolio has been constructed, it needs to be regularly maintained, not left alone.
Even if you have a strategy that has good operating results, there is no guarantee that it will continue to be excellent.
It is more difficult for one strategy to continue to perform well due to changes in the market environment and trends, so the strategy that has become malfunctioned should be removed from the portfolio, and instead, you should keep the suitable ones for the market environment at that time.
To do so, make a habit of regularly checking the operational status and checking if there are any strategies that are out of tune.
3. Don’t simply trust the ranking
For the purpose of assisting signal selection, ZuluTrade has a ranking table in which the strategies that are handled are ranked according to popularity and achievements.
The top-ranked strategies look attractive, but they’re all about past performance.
As mentioned earlier, the FX market environment is constantly changing.
Just because you have achieved good results so far does not mean that you will continue to do so, so choosing a strategy based on ranking alone is not always a good idea.
Please keep in mind that the rankings are based on past achievements only and do not prove your result in the future of the strategy you are checking.
4. Do not judge only by winning percentage
The win rate is always displayed for all signals on ZuluTrade.
From the sound of winning rate, it is tempting to think that the higher the price, the better, but there is a little bit of illusion around here.
A win is a successful settlement (gain) with an unrealized gain, and a loss is a unsuccessful ones.
In other words, a high win rate means that there are few loss cuts.
Loss cuts are very important for risk management, and if you do not cut loss and the draw-down becomes large and it leads to a stop out (liquidation of all positions).
Watch out for strategies that have too high a win rate if they really are “probability of winning.”
5. Make sure the signal has enough experience
The operation period and number of transactions of the strategy you are going to adopt are also mandatory items to check.
This is because a certain sample of achievements is necessary to know the ability of the strategy.
If the strategy is for less than half a year or the number of trades is less than 50, it is risky to judge the ability based on the actual results.
You may want to see at least half a year or more than a year, and because you want to judge the operation performance by the number of trades of 50 times or more, let’s also check whether this condition is cleared.