The age-old question of whether or not to use an ATS (Automatic Trading System) is one that many individuals and hobbyists have pondered. After all, what is more important, the quality of the signal or the simple act of having a system that you can use to execute your trading strategy?
The short answer is that an ATS is not what you want if your aim is to beat the market. An ATS is a tool that can help you develop market knowledge, discipline, and most importantly, an edge.
How does the ATS play in betting affect your odds? Let’s examine.
All About the Edge
If you’re looking to bet using automated trading signals, then you’re best served by an ATS that charges you a flat rate (i.e. does not depend on the value of the trade). Why? Because market makers and large institutional players generally have the resources to stay in the market long enough to capture the large movements. This is often referred to as building a position, and those with a position have an edge. Flat-rate ATSs allow you to be in the market longer and to take advantage of this edge.
So, how much does the edge matter? Well, it depends on you and what you’ll do with it. There are some strategies that you can implement that can give you a substantial advantage over the marketplace, like day trading and market making. In these cases, the edge can be the difference between losing and winning. However, for the majority of us, an edge is just an edge, it’s not a sure thing. This is why you need to be wary of those who charge you for an ATS and how you use their service. In many instances, you could be losing money by using their tools instead of risking it all on your own.
The Downside of An ATS
While there are definite benefits to using an ATS, there are some significant drawbacks as well. One of the drawbacks is liquidity. This is because there are two sides to every trade – one who wants in and one who wants out. When orders are submitted, there’s a limit to how much volume can enter the market at any given time. Think of what happens when there’s a flash crash or a mass market order is submitted – there’s often a significant delay before the market even settles down.
In addition, market making is considered a high-risk activity because you’re basically playing the percentages. Even with the best tools at your disposal, it’s still very difficult to beat the market often times. Remember, all traders are human and make mistakes. Consequently, you could lose a lot of money in the short term simply because a mistake was made. But that’s life – nothing is certain in this world.
Developing A Trading Strategy
An ATS is not a ‘one-stop-shop’ for all your trading needs and should not be viewed as a replacement for common sense approach to investing and hedging. Instead, it’s a tool that can help you develop a trading strategy that is suitable for you and your personality. As you learn to use this tool, you’ll learn to recognize when market conditions are favorable or unfavorable for certain positions and strategies. This is called developing experience and, eventually, leading to confidence.
Additionally, don’t expect to be able to enter and exit the market when you want to. Many ATS providers will require you to set entry and exit timing for your trades based on predefined rules and strategies. Also, take advantage of the fact that many ATS providers offer demo accounts so that you can actually test their systems before using them for real. This is an important step in ensuring that you’re dealing with a safe and reliable source of information.
In summary, while an ATS can be useful and offer various advantages, they are not a magic wand that will solve all your financial problems. Instead, they are a tool that can help you develop the skills, knowledge, and discipline necessary to succeed as a stock market player.