Do automated trading systems trade one stock/instrument or many?

Question

For example, I remember one person telling me that their trading system only traded a certain currency pair, and another telling me that theirs only traded an S&P 500 ETF. My question is:

Can a trading system be programmed to trade many different stocks/instruments? For example, could it screen its conditions on all stocks in the Nasdaq 100 rather just focusing on one? Or, could it possibly screen all stocks with defined rules (regarding market cap, exchange for example)? How does this work?

Thanks for your help!

Answer 1

Automated trading systems can and do have the capabilities of trading more than one security, I'm not sure of the currency but the programming logic should follow securities.

Trading system do scan many securities,  There's not enough room here to explain how it works if you looking for programming logic.

If your looking for all the details in designing a system, this will cost you big bucks.  Some one may want to take the time to list the details, but I wouldn't unless a substantial down payment was made.

Answer 2

Depends on the strategy employed, most prob trade one or two but some prob can trade all stocks at the same time.

Answer 3

For index funds, currency pairs, futures or commodities, it tends to be a specialized program designed with that security in mind since each has their own behaviors.

Automated trading systems can be designed to trade many stocks at a time, but keep in mind that the complexity of such systems increases dramatically because money/risk management change. Normally there is a filtering mechanism for the strategy and then a money management technique based on the timeframe (daytrade, swing trade, long term).

The short of it: You can define a rule for anything you can get a reliable data feed on.

I recommend to join or visit this site as it contains a wealth of information (got to sort through people's opinions though, use your own judgement; it has a list of brokers with reviews also): http://www.elitetrader.com/

Often, proprietary brokers will put hard limits to protect from programming errors, for example: limit the dollar amount of all assets long or short to $100000. This can help when the system first goes live, especially if high margin is used. I recommend avoiding proprietary firms unless you have experience with them, as they can be risky if you don't know what you're getting into; I will not be listing any here.

If you are programming the system, then it's useful to have an API available. I personally use Visual Basic 6 and the broker's API for simplicity. Some brokers have their own scripting languages or interfaces.

These are some brokers that I've seen, but I haven't dont live trading in awhile so I cannot guarantee any specific results:

TradeStation (when you want all the bells and whistles, must have $30000, but well-supported scripting language and good interface) - http://www.tradestation.com/automated_tr...

Interactive Brokers (simpler platform, similar rates, splits forex spread and commission which makes it more transparent; API for Visual Basic 6; has lots of user-created 3rd party automation or assisted trading tools) -

http://individuals.interactivebrokers.co...

MB Trading - heard it was a decent broker, don't know much about it. http://www.mbtrading.com/

Good rates for trading are $0.01/share (low volume) and $0.005/share (mid-high volume). Most use smart routing to ECNs and market makers (whoever has best price), for liquid instruments execution isn't really a deciding factor. Just make sure your automated trading strategy has a failsafe in case of a market crash (good money management strategy should mitigate the risks).