Jenna Arnold has always been fascinated by the stock market and the world of trading. Having dabbled as a part-time trader while at university studying English Language, she leveraged her insights into this world into a full-time career as a writer specialising in trading and broker reviews. Jenna joined TradersBest.com last year and now heads all of our trading content, working remotely from her home in Massachusetts.
The stock market is one of the most popular and volatile financial markets around. As it grows, so do the ways to develop traders trading techniques, like automated trading and using a stock trading bot.
This TradersBest.com review looked at all the possible reasons to consider using automated trading to better your trading experience. Our team is full of financial market experts ready to help you decide if an AI trading bot is right for you, and consider what factors to look out for when choosing one.
The stock market consists of marketplaces and exchanges where traders buy, sell and issue shares of publicly held companies. These financial activities occur in online exchanges and over the counter (OTC) marketplaces, operating under rules and regulations depending on their trading region.
The stock exchanges that are physical locations allow transactions to be carried out on the trading floor. It involves the method of traders shouting outbid and offer prices. The other method of online exchanges uses a different approach. A network of computers allows trades to be made electronically, which can be found in an exchange like NASDAQ.
There are thousands of stocks available to trade globally through different stock markets. These include the leading stock exchanges in the US, like the physical New York Stock Exchange (NYSE), the Chicago Board Options Exchange (CBOE) and the digital NASDAQ. Other global stock exchanges include the London Stock Exchange (LSE) and the Dubai Financial Market (DFM).
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How it works
To trade in the stock market means transferring stock or security from a seller to a buyer in exchange for money. Two parties have to agree on the price of the stock before the transaction can take place. Transactions can take place by small individual stock investors and larger financial institutions based anywhere in the world, including hedge funds, banks and insurance companies.
Buy and sell frenzy
Essentially, a potential buyer will bid a specific price for a stock they’re monitoring. The potential seller of the stock will then ask for a specific price. When the bid and ask price match, a sale can occur on a first-come, first-served basis if there are multiple bidders. However, if you’re the only bidder, you can successfully buy the stock. The stock exchange facilitates these transactions in a secure environment and allows traders to go through many investors selling their stock and find the best price to buy at. Or find a buyer who will offer them the price they want for the stock they’re selling.
AI Stock Trading Bot – what is it?
The stock market uses automating trading systems to help traders boost their experience. An AI stock trading bot is an artificial intelligence designed algorithm. Its purpose is to follow the preset of instructions to find the best opportunities in the market to enter and exit trade positions. A trading bot can come in different trading methods like trading signals, as found in the platform AtoZ Markets. It specialises in providing customers with automated daily trading signals to prompt you to make the right trading decisions and maximise profit.
A stock trading bot is excellent for traders who understand coding as they have the opportunity to create their own bots. Suppose you’re not familiar with coding and mathematical data. In that case, you can purchase a trading bot from one of several online trading platforms that designed their algorithms to provide you with successful opportunities to trade. It’s important to research the vital aspects of a trading bot and ensure backtesting methods are in place to confirm the bot’s performance.
Computer code
As mentioned, a stock trading bot works well with users who have some knowledge of coding. The algorithmic trading is generated by this code that allows users to execute buy and sell signals in the stock market confidently. The entry rules tell the bot when the best time to buy or sell is, and the exit rule tells the bot when to close the current position once a profit has been made. Computer software like MetaTrader 4 (MT4) is ideal for creating and using trading bots. You can set it up to the MT4 trading platform with your broker account, which uses the MetaQuotes Language 4 (MQL4) processing for coding strategies. MT4 has several benefits that you can find on our review on the TradersBest.com website. We included some significant benefits below.
Why use MT4?
Although MT4 was created for the forex market, you can trade other marketplaces, including cryptos and the stock market. It is an easy-to-use platform with valuable information for traders of all skill levels who want to understand why automated trading is a reliable trading tool. If you are a more advanced stock trader, you can develop an algorithmic strategy by using the mathematical model provided on the platform. Ensuring the bot is looking at the information you want to scan through and identifying market behaviour.
Stock Trading Bot Examples
In this stock trading bot review, we included a few AI bot examples that are quite popular in the market.
EquBot
EquBot is a popular choice for many traders as it is affiliated with IBM. It takes data from exchange-traded funds (ETFs) and combines that with the AI stock trading bot. The bot will then provide its users with a detailed look at analytics and alerts resulting in easier trading decisions. In addition, EquBot analyses the new articles from around the world and social media events and announcements to keep you updated with financial news statements released by prominent financial organisations. Some of the other key features of EquBot include an analysis of over 15,000 trades a day. It also makes over 100 recommendations a day. Although it is based in the US, it does have a global reach.
Imperative Execution Inc. (Imperative X)
Imperative X is another US-based financial trading company that specialises in using AI technology. It has a worldwide range of traders who use its services to match orders and get the most of every successful trade. Imperative X has a range of built-in systems to help deepen your understanding of the bid and offer process of trading. Their stock trading bot data analysis will also provide you with an in-depth view of all the executions on the platform. Like EquBot, you’ll also have access to the latest financial news and press highlights, keeping you in the know.
TrendSpider
In this TradersBest.com review, we also looked at another popular choice called TrendSpider. This stock trading bot is popular among analysts and day traders. It has been a fairly recent creation since 2018. It has since stood out among other platforms due to its ability to quickly scan the financial market data and turn that into opportunities to enter and exit positions. They use a cloud-based AI system that is a combination of backtesting and technical analysis. While they provide you with the opportunity to make a successful trade, they also double-check how strong the algorithmic-based strategy is by looking at the stocks historical data.
Stock Trading Bot Pros
In this TradersBest.com review, we included some of the key advantages to consider if you want to use stock trading bots.
Reduces cost
Using a stock trading bot will significantly reduce the costs required in trading. These include research costs that the trading bot will do for you at a fraction of the time compared to you or someone else doing it. Trading bots act as financial experts assisting you with your positions in the stock market. The price to purchase a stock trading bot is more cost-effective than using a human stock trading expert or broker services. You’re saving money by not having to outsource some of the work to execute successful trades.
Improved efficiency
AI trading bots are much faster than humans trading. They’re essentially able to scan the entire stock market and use historical data and market research to find the right opportunities for the trader to enter and exit positions. All this can be done within minutes, which means the user can have plenty more successful trades throughout the day than scanning the market manually and having a smaller scale of trade executions. In addition, this improves profitability and allows traders to focus on other aspects of the stock market at the same time instead of waiting to go through the market. You can complete a lot of tasks simultaneously with the help of a stock trading bot.
Logical research methods
When you use automated trading systems, you’re leaving behind the emotion that is attached to trading. High emotions can have a positive or negative effect on your trade. Traders often hold on to positions longer than they should because they like the asset and want to see the price increase when the market predicts it won’t. Additionally, some traders sell their positions too quickly for fear of suffering a significant loss. This could do more damage than good if the timing is off too. A stock trading bot considers the data when coming up with trading opportunities. It responds to the parameters that it has been set, so if the performance is not up to standard, it’s not due to human reaction but something in the system.
Develops trading strategy
Using automated trading systems helps to develop your trading experience. Some platforms like AtoZ Markets are known to provide trading tools and resources to develop their customers’ skills further. They predominantly look at automated trading signals in the forex market but can transfer their signals to other markets like stock. An AI stock trading bot is an excellent tool for beginner traders who want to scan the market efficiently. It’s also a great help for experienced traders who have perfected their trading strategies and use the bot to multiply their potential to generate returns daily.
Backtesting feature
Each stock trading bot should be equipped with a backtesting feature. Backtesting ensures the algorithm is reliable and performs the tasks it’s been preconceived to do. We recommend traders use an automated system that also has a free demo account. It allows you to not worry about spending your money just yet, but instead, working on your trading strategy with an AI trading bot and seeing if it’s a useful resource or not. If it’s not suited to your trading needs, you can continue to backtest until you find a bot that’s suitable for you.
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Stock Trading Bot Cons
We also looked at a few negatives associated with using trading stock bots and highlighted them below.
Unpredictable market changes
The financial markets are constantly evolving. The more volatile, including cryptocurrency and forex, and the stock market, continue to welcome more new traders every day. It generates more traffic, and some platforms aren’t able to keep up with high volumes of trades, which can delay your trading experience. In addition, it is essential to keep up to date with the latest financial news and what is going to be released on the economic calendar. A company could release some information that could drastically affect your stocks, which your AI stock trading bot may not be ready for. If you’re not familiar with ways to adjust the bot to suit the changes, you could risk losses.
Unreliable algorithms
Some online platforms and brokers claim to have high-performance trading bots at competitive prices. It can look attractive to traders who may not know what to look out for yet, but just because the price to purchase is low doesn’t mean you’ll get the best results with your trades. It’s important to have some general understanding of what goes into a stock trading bot so you know what to look for and what to avoid in the market. A broker could claim to have a fantastic algorithm based bot, but when you try it for yourself, you realise it was an exaggerated claim, and you’ve wasted money purchasing the bot.
Lack of bot understanding
In addition to unreliable algorithms, you may choose a bot that is an excellent market choice but not know what to do with it due to a lack of knowledge. The stock market requires traders to dedicate enough time to understand the ins and outs of trading. Automated trading can be more complex as those who have a mathematical background may have the upper hand. However, even as a novice to the financial market, you can still develop your skills over time if you want to see results in the long run.
Conclusion – Stock bots trade better than humans
Overall, we think using a stock trading bot is an excellent idea to develop your trading experience. We think you should try using an automated trading system if you have a general understanding of how AIs work and some advanced trading skills. It requires time and knowledge to master, but your skills will potentially result in greater returns in the long run.
Algorithmic trading is quite complex for a trader who is new to the stock market as they might still need to comprehend the market as a whole before moving on to the AI bots. Stock bots trade more efficiently than humans, a key selling point to their popularity and longevity. As the stock market continues to evolve, so does AI.
Crypto Trading Bot – FAQ
❔How do I make my own automated trading system?
An AI stock trading bot is used to increase trades’ efficiency and success rate in the financial markets. For traders who are more experienced, an automated trading system is a great idea to improve the number of successful executions daily. Some knowledge of algorithms and coding is essential if you want to alter the preset instructions in the bot. But most companies offer bots that provide templates for traders to use depending on what is happening in the market.
❗Are there any stock trading bot risks?
The stock market is a highly volatile place for traders. Using a stock trading bot acts as an expert to essentially do most of the work for you. Our review outlines why it’s important to know AI trading before you consider using the method to avoid dramatic changes that result in financial losses.
💸Do stock trading bots make money?
If you’re new to stock trading, it’s common to see fluctuations in stock prices. It’s also not unusual to have losses and profits depending on your trading strategy and how volatile the market is. The more you trade, the better your skills will be, and you can begin to understand why a stock trading bot can be helpful too.
