Trading bots have revolutionised the way in which people interact with the financial markets and advancements in technology have made them more accessible than ever before for traders of all levels.
When it comes to choosing a trading robot, there are numerous options available and which one you choose will depend largely on your individual circumstances. However, there are a few prerequisites that every trading robot should have and in the following guide we’ll break down some of the key things to look out for.
The term trading robots conjures up images of machines busily playing the markets and tuning over hundreds of transactions a second, but in reality, they should simply be viewed as tools to make a traders life easier.
Some markets, such as cryptocurrency and Forex, are hugely volatile and operate around the clock. This means there is a huge amount of data to wade through in order to identify trends, break-out points and potential opportunities. An automated Forex trading robot can collect, analyse and act on this data at speeds that simply aren’t possible for the human trader alone.
Choosing a trading robot requires a little research. There are plenty on the market and they vary in the functions they offer. For example, AtoZ Markets provides algorithms that can generate signals for the human trader to act on, as well as a complete automated trading service, wherein a trading bot actually makes transactions. Many traders prefer to have as many options as possible so we often recommend AtoZ Markets as a suitable platform to check out.
It will be of little surprise that trading robots can get fairly complex and the leading platforms are composed of highly sophisticated software modules. However, ultimately they all provide similar core functionality.
Most trading strategies are built around analysis of previous price movements. An FX trading robot collects huge amounts of market data and analyses it to generate signals that a trader can then use to build a strategy. The volume and speed at which a trading robot can do this are far beyond the capabilities of an individual human trader.
A standard trading robot will also be able to use the data it collects to make a risk analysis. Once again, this can be done far faster than a human trader is capable of it which means less chance of missing optimum entry points. Some bots can also use risk analysis to suggest how much to invest and how long to keep a position open.
In addition to number crunching, a trading robot can also actually process transactions on behalf of the trader. Effectively, complete automation allows traders to be active 24/7 and process far more transactions than they would be able to without the support of a trading bot.
Trading bots are powerful tools that can enhance a traders capabilities. By processing market data at high speeds, a trading algorithm can open up more possibilities than a human trader could manage alone. However, it’s important to be aware of what a bot can and can’t do.
Traders should bear in mind that a trading robot is a set of programs – software that has been instructed what to do based on pre-existing trading strategies and analytical techniques. A trading robot cannot increase your chances of winning in itself, but what it can do is help you to apply trading strategies more efficiently and in higher volumes.
When it comes to success rates, figures vary between providers. However, here at TradersBest.com, we have been impressed by AtoZ Markets’s trading algorithms – which have been known to show success rates of over 70%.
Finding an effective trading robot can take time and should involve some careful research. You might already have an idea of what it is you are looking for, but here at TradersBest we think the following considerations should form an important part of choosing an effective trading robot:
You will usually have to pay to use a trading bot – unless you plan on building your own. Fees will vary from provider to provider and you may even find that some platforms, such as AtoZ Markets, offer free algorithm-based trading signals. Always factor in fees as part of your trading budget.
You can find trading robots that are more geared towards novice traders, offering an approachable user interface and pre-set tools and strategies that are simple to start using right away. Alternatively, an advanced trading robot might be highly customisable but will require knowledge of one or more programming languages. Consider your requirements and level of technical understanding when making your choice.
Demo accounts are the perfect way to find out if a platform is suitable for your requirements as well as learning more about using a trading robot. AtoZ Markets offers new users a 14-day free trial, which is why we often suggest it as a good option for novice traders.
Some trading robots are optimised for particular markets. If you want to trade across multiple markets then you will need to find a platform that offers this service and more often than not this may involve the use of more than one trading robot.
Once you’ve chosen a robot to trade forex with, you’ll need to make sure you have access to the software by either opening a trading account or adding it to your existing trading platform – how you do this will depend on the bot and the platform that you choose.
A trading robot can do quite a few things. Firstly, it can collect and analyse market data to try and find trends. When it has done so, it will generate a signal which is then sent to you, the trader. You can then act as you see fit, either trusting the algorithm implicitly or combining it with your own market analysis.
When a trading signal has been generated, you can simply receive it as a tip and choose whether to act on it. Or you can have a trading robot process transactions automatically – without you having to intervene. This is often beneficial as a bot can process many more transactions than a human trader.
Trading bots can also be used for arbitrage trading, as they can quickly scan through different exchanges to find variations in an asset’s price and exploit the margin for profit. This often involves small returns so is only worth doing in high volume. It also needs to be done at high speed as arbitrage rarely exists for long – which is why trading bots are an effective tool.
At this point, using a trading robot might be starting to seem like a no-brainer, but it’s worth taking a look at the major advantages and disadvantages of using automation as part of your trading strategy.
A trading robot has the following advantages:
Even the most disciplined trader can fall victim to making rash decisions when the markets become particularly volatile or a position looks like it may turn against them. A trading robot isn’t troubled by emotion and can stick to the strategy at all times.
A trading robot can read hours, days, even years of the previous price history in seconds to generate trading signals. They can also open and close multiple positions simultaneously. As such, traders using such software can gain much more market exposure than they would when trading the old fashioned way.
Discipline is hugely important when it comes to trading and once again this is an advantage that a trading robot can have over a human trader. There are numerous reasons why a trader’s discipline might falter – be they reasons relating to the markets or simply to do with everyday life. A trading robot is 100% disciplined, 100% of the time.
Whereas a human trader needs downtime to sleep and enjoy some kind of life outside of the markets, a trading robot can remain on the job 24/7. This is especially beneficial if you are looking to trade in markets that operate around the clock, such as when Forex or crypto trading.
However, whilst a trading robot can be a very worthwhile addition to your trading arsenal, they aren’t without their downsides:
Just like any software, a trading robot can become less effective over time – especially in ever-changing markets like cryptocurrency. As such, you need to ensure you are using a platform that updates its software based on performance feedback.
A trading robot is not a get rich quick scheme. They generate signals based on analysis of historic price movement and, as such, these signals are speculative and never guaranteed. Only use a trading robot if you are fully aware of what it is and isn’t capable of.
There are numerous trading robots on the market and, whilst some are designed with the more advanced user in mind, others are aimed squarely at those with little to no prior experience of using trading algorithms.
You have a few options for ascertaining the effectiveness of a particular trading robot. You can check out existing reviews and customer feedback regarding results or, with some platforms, such as AtoZ Markets, you can actually sign up for a free trial and check the trading robot out for yourself.
Trading bots should be seen as just another trading tool, such as trackers, signals or even your trading platform itself. Whilst they can have a very positive effect on trading efficiency, they do not guarantee results.
There is plenty of information online regarding trading bots and here at TradersBest we’d certainly encourage you to do as much research as possible. However, as mentioned above, don’t forget that some platforms offer free trials and this is the only real hands-on way of learning how trading bots work.
Different platforms will charge different fees for their auto trading software. Some will ask for a one-off cost to use their software, whilst others may ask for a subscription commitment. However, it’s worth shopping around as you might find a platform that offers free trading signals.
As we have touched upon, it’s actually possible to build your own trading robot from scratch.
Many traders may see the appeal in building an MT4 automated trading robot that they can tweak and adjust to suit their individual trading style, but to do this requires a high level of technical knowledge as well as advanced competency in one or more web programming languages.
The advantage of using a platform like AtoZ Markets is that everything is done for you and, crucially, the bots used by the platform have undergone extensive testing. There are also plenty of ways to customise the experience. All things considered, we at TradersBest would advise sticking with third-part algorithms unless you are very confident in your programming skills and understanding of how markets work.
A reliable trading robot can prove an invaluable trading tool when used correctly. Whilst they are certainly not some sort of guaranteed money maker, if you are prepared to spend some time learning how to apply algorithms then there’s every chance you will see improved efficiency in your trading.
Trading robots are revolutionising the financial world, but many novice traders don’t fully understand what they are and what they do. A trading bot is effectively a collection of programs that automate different parts of the trading process.
Many traders actually choose to build their own trading bots and use them in conjunction with their favourite trading platforms. It’s also equally common for firms to offer their own proprietary trading platforms with fully integrated support for bots. Whilst MT4 remains a hugely popular platform, traders should be open to the possibility of using a new interface if it means gaining access to the top trading bots.
Building an effective trading robot requires a huge amount of knowledge of both trading and coding. That’s why we usually recommend that traders instead use reputable third-party software. Not only will this save endless hours of coding, but existing platforms have already thoroughly tested their trading bots.
Different trading bots do different things. Some analyse existing data to provide recommendations, whilst others can autotrade on your behalf. Many modern bots do both of these things. The best way to find out what a bot can do is by visiting its parent website and checking out its features.
Trading bots, from a programming sense, are pretty complicated beasts. However, ultimately they are mostly designed for the general consumer and as such, they need to be accessible for non-IT professionals. Some are more complicated than others, but for the most part, you should be able to find one that suits your level of technical understanding.
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