Autotrading

Reviewed by James Chen

Updated Jun 13, 2018

What is Autotrading

Autotrading is a trading plan based around the buying and selling of orders placed automatically
from an underlying system or program. The buy or sell orders are sent out to be executed in the
market when a certain set of criteria is met.

BREAKING DOWN Autotrading

Autotrading is a type of trading plan that allows investors to capitalize on market opportunities in
real time. It typically involves complex programming through advanced software trading
systems. Traders can program software systems to make automatic trades based on a customized
trading strategy. Basic forms of autotrading can also be utilized by all types of retail investors.
Overall, autotrading systems are used in a wide range of markets including stocks, futures,
options and forex.

Autotrading Capabilities

Generally autotrading requires a pre-determined trading strategy. It can be structured in various

ways for all types of investors. Retail investors may deploy basic autotrading plans through the
use of automated investing at specific times or through conditional orders on brokerage
platforms. Conditional orders allow an investor to enter trades at specified levels for automatic
execution when a price is reached.

Institutional investors and technical traders will use complex trading systems that allow for
conditional orders and grid trading. These investors use more complex conditional orders that
can be generated through advanced charting software systems, advanced trading platforms or a
combination of both. Many technical day traders will subscribe to trading systems such as
ProfitSource that work in connection with a trading platform to place automated trades.
Brokerage platforms such as TD Ameritrade and Interactive Brokers are also popular for
technical autotraders. Institutional investors will typically have their own proprietary trading
platforms that allow for auto trading through algorithmic programming. (See also Choosing the
Right Day-Trading Software)

Autotrading Strategies

Investors use autotrading to execute pre-programmed trades in real time. Autotrading allows all
types of investors to build trading plans for capitalizing on their own trading strategies.
Institutional investors may use complex algorithms that seek to place trades for investment
portfolios based on defined criteria governed by a portfolio’s objective.
Technical day traders will use auto trading to invest based on technical market signals. Many day
traders choose to automate investing through a grid trading strategy. Grid trading strategies can
be useful for investing into a trend as they allow automated investing triggered by incremental
moves of the security’s price in a specified direction.

Technical day traders also commonly use complex conditional orders for auto trading. These
types of orders allow an investor to specify an entry price and build a collar around the trade to
institute pre-determined profit and loss levels for risk management. Autotrading is also popular
for investors in the forex market. Forex autotrading also allows for customized programming.
Many forex traders will choose to invest with preset autotrading platforms that offer autotrading
based on trading strategies developed by the software provider. (See also Forex automation
software for hands-free trading)

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Related Terms

Trading Plan
A trading plan is a systematic method for identifying and trading securities that takes into
consideration a number of variables including time, risk and the investor’s objectives.
more
Grid Trading
Grid trading is a type of technical analysis trading that is based on movement within specific grid
patterns.
more
SelectNet
SelectNet is an automated trading system.
more
Trading Platform Definition
A trading platform is software through which investors and traders can open, close, and manage
market positions through a financial intermediary.
more
Discretionary Order
A discretionary order is a conditional order placed with some latitude for execution.
more
Below the Market
Below the market can refer to any type of purchase or investment that is made at a below the
market price.
more
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