Automated stock trading software is used by both trading funds and individuals. Funds use software optimized for speed of execution, while individual software often includes user-friendly interfaces and the ability to write and test algorithms. Black box systems are marketed to individuals, but real-time verified results are important.
Basically, there are two types of automated stock trading software: software used by trading funds and software used by individuals. The use of software funds is developed internally and often focuses on finding small advantages that can be exploited for speed of execution. Software traded for individuals usually has an attractive user interface and includes a Depth of Market page, which shows the bid and ask prices for any given stock.
Automated stock trading software used by funds is generally written in the C++ computer language. It is optimized for speed of execution, as the software must track thousands of shares, decide what to buy or sell, decide how many to buy and sell, communicate directly with the trading computer, and see the time and price so it can close trades based on be necessary. Funds that rely on that speed are very careful to locate the trading computer close to the exchange you are trading on. The small difference in execution time between being 0.25 miles (400 meters) away and 2.5 miles (4000 meters) away can be critical to financing the trade.
Many creators of automated stock trading software for individuals have made it possible for the trader to write and test their own algorithms. Pre-written routines for standard technical analysis indicators are usually included. Most have good charting capabilities and allow the user to draw trend lines, use up and down arrows to mark bars of interest, and allow you to take notes on the chart itself. Graphics can often be saved for future reference in standard formats, such as .jpg or .bmp.
Some creators of automated stock trading software for the individual offer little more than the ability to place a basket of orders at the touch of an on-screen button. While sending a basket of orders can be a useful tool, this feature should not be confused with the size or speed of the use of trading funds from basket orders. Individuals cannot compete for funds in a commercial arena if speed is the only criteria for success or failure.
Black box trading systems are marketed to individual traders looking for automated stock trading software. A black box system means that the algorithms are not disclosed. These systems may come with many test results showing how successful they have been in the past, but the careful buyer will want to know if there is a substantial body of results for real-time trading, preferably one verified by an independent tester. The reason for insisting on real-time verified results is that most systems are easy to optimize on historical data, generating very good results, but will lose money on real-time trading.
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