Trading Bots: What Are They and How Can You Profit?

 

In the last decade, human brokers have been largely replaced on the world's stock exchanges by so-called "trading robots" - computer programs specialized for stock trading. What kind of "beast" is a trading or stock exchange robot?

 

"Trading robot" - a program that partially or completely replaces a person when working on the stock exchange, and the robot can be controlled by a trader (for example, the trader himself takes the decision to open/close a position) or work according to a pre-designed program.

 

Robots that trade independently on the stock exchange are nothing more than specially designed programs. Based on mathematical algorithms, they can independently monitor the performance of various indices on the stock exchange and make buy or sell transactions based on the obtained data. The usual volume of robot transactions is several times higher than the number of transactions made by humans.

 

The task of trading programs is not only to help traders in their routine work. Their "super task" is to realize trading strategies that are difficult or impossible to implement manually. In essence, a stock trading robot is a predetermined algorithm for concluding transactions.

 

Specialists usually divide stock exchange robots into three groups - trend (directive or directional), counter-trend and arbitrage. They correspond to different types of trading strategies.

 

The usual task of a trend robot is to catch the tendency of quotes growth or fall as early as possible and open a position. After that, it should timely "feel" the trend reversal and have time to fix the profit (i.e. sell shares or currency). Counter-trend robots try to catch all price pullbacks, especially they work well in a flat market state. In its turn, an arbitrage robot should make profit by detecting price misalignments for identical or closely related assets in different markets.

 

Also robots can be divided into indicator robots (use indicators as signals for opening and closing trades) and candlestick robots (use combinations of candlestick patterns as signals for opening and closing trades).

 

Trading algorithms

 

Specialists say: the main thing is to choose an effective trading strategy. Today, according to various estimates, robot programs conduct from 30% to 50% of transactions on stock, futures and currency markets of the planet. Mechanical trading systems are considered to be one of the most effective and reliable trading methods. First of all, automated trading helps traders in selling large blocks of securities. The bid is broken down into several small ones, and they are gradually brought to the exchange according to a certain algorithm.

 

On normal trading days, the robot makes decisions automatically and executes transactions without letting subjective evaluation take over objective technical calculation. It is believed that robots are more effective in short-term intraday trading, which is usually based on technical analysis indicators. Absence of emotions helps when it comes to fixing losses - selling assets falling in price.

 

If the mechanism of operations on this particular exchange can be algorithmized, and the trader himself is not able (or does not want) to personally process the entire amount of data, it makes sense to transfer trading to a robot.

 

The advantages of trading robots can be safely attributed to:

• Complete absence of emotions - a robot is not a human and cannot cry.
• Reaction speed - from the signal to open (close) a position to entering a request takes a fraction of seconds.
• Full adherence to the trading idea without any deviations.
• The trading robot does not know fatigue and starts working immediately after switching on.
• Speed of processing incoming data. A robot can track data on hundreds of instruments at a time.
• Robots can trade hundreds of algorithms simultaneously, which an ordinary person will never be able to do.

 

The disadvantages include:

• The risk of an error in the program code. This error is eliminated by testing.
• Predominant use of technical analysis.
• Lack of fundamental analysis
• If the robot works well on the trending market, and at some point the market becomes more unstable or turns around, the robot will make losses.

 

There are a lot of pluses and they more than cover a small number of minuses. Each trader has the right to decide for himself about installing a trading robot on his terminal. You can buy a ready-made robot, but the prices will be considerable. And you can learn to create them yourself, especially it is not so difficult as it seems from the outside, and even traders without programming knowledge can do it themselves!

 

Choosing a robot trading strategy

 

Finding the right robot is not an easy task! Let's take a look at some basic information to consider when comparing different trading robots that you are interested in:

 

1. Conservative trading strategy from 5,000 EUR with profits up to 20% /month.

• Currency market
• Commodities: WTI
• Metals: Silver

 

2. Weighted average trading strategy from 10 000 EUR with profit up to 30% /month.

• Commodity market: WTI
• Metals: Silver / Gold
• Index: SPX
• NG

 

3. Fully diversified, arbitrage, venture capital investment trading strategy from 25,000 EUR with profits up to 38% /month.

• Commodity Market: WTI / Brent
• NG
• Metals: Silver / Gold
• Index: SPX / CAC 40
• Stocks
• Cryptocurrency