An automated commodity trading system are said to be computer program that creates commodity trading orders and automatically submits them to a commodity market center. This trading system allows traders to establish explicit for commodity trade entries and exits which are automatically or mechanically executed by the computer.These automated commodity systems are programmed to search for commodity market trends, analyze the commodity market, and apply specific statistical and technical formula which generates signals to buy or sell a particular commodity e.g. precious metals like gold and silver which either goes long or short.
The commodity trade entry and exit orders are based on conditions like a moving average crossover or based on strategies that demands an in depth understanding of the programmi8ng language which is specific to the trading platform of the user. These automated commodity trading software is linked to a direct access broker.
IMPORTANCE/BENEFIT OF AUTOMATED COMMODITY TRADING SYSTEM
IT MINIMIZES EMOTIONS
An automated commodity trading system minimizes emotions throughout the entire commodity trading process. By checkmating emotions, a trader automatically sticks to the plane programed by the trading system. Since the commodity trade is executed automatically, a commodity trader will not have the ability to make any changes or question the trade pattern once the trade order are placed.
IT MAINTAINS DISCIPLINE
Since the commodity trade order is already established and the trades are performed automatically, discipline is always maintained even in a volatile commodity market. The loss of discipline by traders is always seen as a result of fear of encountering loses or greed for more profit.
IT HAS AN IMPROVED ORDER ENTRY SPEED
An automated commodity trading system responds immediately to the fluctuating market conditions. They generate trading orders as soon as the criteria for commodity trading is met. As soon as a trading position is entered, orders are automatically generated including stop losses and profit targets therefore, a huge difference in the trades outcome can be made if a trader gets in or out of the trade few minutes earlier. Automated commodity trading system prevents the disaster in having a trade reach the profit target and pass the stop loss level before trade orders are entered.
IT HAS A DIVERSIFIED TRADING SYSTEM
This automated commodity trading system allows the commodity trader to trade commodities using multiple accounts and strategies at once. It has the ability to spread risk on a variety of trading instruments while developing a hedge against losing positions.
In conclusion, even if anautomated commodity trading system is seen as a sophisticated method for trading commodities, it is also failing. It encounters mechanical failure like power losses, computer crash, system quirks and loss of internet which prevents a trade order to be sent and therefore in requires monitoring. So,automated commodity trading system should not be total considered suitable for carefully executed commodity trades.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.