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.
Swing trading is becoming increasingly popular amongst those who want to get involved with the financial markets but perhaps lack the availability required for day trading.
Swing traders work over longer time frames – usually over several days or even weeks – which means not having to attend the markets throughout the working day. But as with other forms of trading, there are numerous tools to help traders optimise their experience – not least swing trading bots, which can generate signals and even open and close positions automatically.
Many people are confused by what swing trading bots are and what they are not. In a nutshell, a trading bot is simply a collection of software protocols that automate certain parts of the trading process. The trading bots at AtoZ Markets, for example, can analyse market data to find the suitable entry or exit points for a particular asset – and even execute trades automatically.
Swing traders need to keep track of numerous data feeds to help them plan their trades. A swing trading bot simply lightens the load by taking on some of this work and collecting and analysing data in a much more efficient means.
Swing trading bots should not be seen as a shortcut to trading success, but rather just another tool that can be used to build an effective strategy. Traders still need to do their homework and learn about their chosen markets.
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How do swing trading bots work
Swing trading bots might be something of a mystery and it’s certainly true that there is some very complicated software out there, beyond the understanding of anyone that isn’t familiar with the latest programming languages. However, whilst most bots offer differing services, they all effectively have the same set of functions. These include:
Technical Analysis
Anyone with any trading experience will know there are several indicators and strategies that can be employed to identify trends and patterns in an asset’s price movement. However, this can be hugely time-consuming – especially for those trading multiple instruments. Swing trading bots can save raw data, analyse it and decide whether it presents a good opportunity for the investor.
Estimate Risk
By conducting technical analysis of existing data, as detailed above, swing trading bots can attempt to calculate potential risk in the market. This information can then be used to decide on whether or not to buy or sell an asset as well as how much to invest in the position.
Executing Trades
Most top swing trading bots also include a module capable of buying or selling an asset according to a pre-set strategy. This can be particularly useful in situations that require immediate action – especially for swing traders who are perhaps not monitoring market activity when an opportunity presents itself.
Are swing trading bots reliable?
People have differing ideas over what swing trading bots can and can’t do. The reality is that many factors will affect your trading experience – with or without the help of automated trading software.
At AtoZ Markets, for example, customers have used trading algorithms to great effect and at times they have been known to show a success rate in excess of 70%. However, traders should always manage their expectations. Just as the top human traders lose on some transactions, so too can swing trading bots.
Our swing trading bots aim to provide a reliable performance for our customers, but it’s important that you also spend time researching the financial markets for yourself, to give yourself a better chance of success.
How to choose the right swing trading bot
If you’re struggling to decide between the myriad swing trading bots available on the market, it’s a good idea to boil down the decision making process into a few key factors. Each trader will have different requirements, but typically the following features are important to look out for:
Markets
Swing trading can be done across numerous markets, including forex, cryptocurrency and stocks. Swing trading bots can usually be applied across any market that uses a compatible trading platform, but it’s also possible to find those that are optimised for particular instruments. Be sure to do your research when making your choice.
Fees
It will come of little surprise that, unless you plan on building your own algorithm, then swing trading bots usually come with a fee attached. More often than not, this comes in the form of a subscription fee. Naturally, you’ll want to make sure that using a trading bot is going to be cost-effective.
Demo account
Arguably the best way of choosing between swing trading bots is to actually try them out. For this reason, we often recommend AtoZ Markets, as it offers a welcome offer that allows you to try out the platform free of charge for 14 days. This is a good option if you want to see for yourself how effective signals can be and will also provide the perfect way to get acquainted with a very reputable platform.
Results
With so many swing trading bots available, you want to know that the one you choose is capable of delivering results. For example, at AtoZ Markets there is plenty of feedback from users as to the effectiveness of the algorithm-based trading approach, which has been known to yield a success rate of over 70%.
Usability
Of course, swing trading bots would be of little use if only software engineers could understand how to use them. If you’re relatively new to swing trading, then you need to make sure you find a suitable bot that is user friendly and has an interface that makes sense to you.
How to use a swing trading bot
Deciding between swing trading bots is the first step. Once you’ve made your choice you then have a few options as to exactly how you make use of trading signal algorithms. There are different levels of automation and you need to figure out the best way of getting the most out of a trading bot.
Algorithm-generated trading signals can be used in exactly the same way that you would use information from manual technical analysis. For example, you can use signals to inform a trend following strategy. This is the foundation of many common strategies and involves buying on an upwards trend and selling on a downwards one.
It’s also possible to use bots as part of a copy trading strategy. As the name suggests, this involves copying the activity of successful traders. It’s sometimes referred to as social trading and swing trading bots can handle the tracking of a chosen trader’s transactions, as well as opening and closing positions in tandem with them.
You can also use traditional trading tools in conjunction with swing trading bots, such as stop/loss and take/profit orders, which most traders know are invaluable when it comes to managing risk.
Pros and cons of swing trading robots
Swing trading bots can really prove their worth over the long term and as such most high-level traders will include them in their trading arsenal. However, as with most financial technology, there are advantages and disadvantages when it comes to using swing trading bots.
Some of the major plus points are:
Emotionless trading
Watching the markets can be an emotional experience and this often leads to traders making rash decisions. Getting nervous when an asset experiences a downturn, for example, prompts many to close a position prematurely, even if this goes against the original strategy. Swing trading bots aren’t susceptible to this – they remain completely systematic in their approach and will stick dogmatically to the strategy.
Faster processing
Swing trading bots can process data, make analytical decisions and gauge risk faster than a human trader could ever be capable of on the stock market. They can also open/close several positions simultaneously, something which is again impossible for an individual working without a bot. Naturally, this means a far more efficient trading experience.
Trading discipline
Related to point one, discipline is a key factor for building trading success. This includes keeping to a schedule, keeping emotions in check and adhering to a strategy during periods of market volatility. Numerous factors can affect a human trader’s level of discipline – very few of which are likely to affect swing trading bots.
Risk diversification
As we’ve already discussed, swing trading bots will include algorithms that can assess risk – often much more efficiently than a human trader. In addition to this, multiple swing trading bots can also be used to diversify risk across several markets or asset classes. Again, this is something that would be difficult for the human trader to achieve efficiently.
Trade around the clock
The forex and cryptocurrency markets are trading 24/7, which means that whilst the human trader sleeps, opportunity is potentially passing them by. Swing trading bots don’t need rest or days off – they can be set to work around the clock and potentially making a profit at times that the human trader would otherwise be offline.
Swing trading bots have other advantages, but its also to be aware of any downsides:
User input is still required
Swing trading bots can do an awful lot, but they don’t replace a solid knowledge base and careful research from the trader. Bots need to be monitored to ensure they are working efficiently and in addition to this, the more a trader knows about various trading tools and strategies, the better they’ll be able to make use of swing trading bots.
Trading bots can make mistakes
Lastly, it’s tempting to assume that a swing trading bot is going to provide perpetual income without much input from the user, but this isn’t the case. Swing trading bots do not guarantee returns, nor do they promise to find the most efficient strategy or approach every time. It’s important that traders always keep these limitations in mind.
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Swing trading bots – Quick Facts
How reliable are swing trading bots?
In terms of function, swing trading bots are usually fairly reliable and most reputable platforms will regularly perform updates to fix any glitches. However, when it comes to how reliable their information is for winning trades, this depends entirely on how they are used and traders should remember that no algorithm is foolproof.
How do I get a swing trading bot?
The best way to add a swing trading bot to your arsenal is by opening an account with a reputable platform that offers the service.
Can a swing trading bot trade for me?
Technically, a swing trading bot can open and close positions based on a pre-set strategy without any further input from the user. However, this isn’t advisable over the long term and traders are advised to monitor the performance of any automation software they are using.
How complicated are swing trading bots?
When it comes to programming, swing trading bots are pretty complicated. The good news is that you don’t need to be an IT expert to use them in your trading – most top bots will have an intuitive and user-friendly interface aimed at traders of all levels.
Are swing trading bots legal?
Swing trading bots are legal on many markets around the world, but if you are unsure then it is best to check the financial regulations in your jurisdiction.
Conclusion
If you’re a swing trader looking to improve your efficiency, then swing trading bots could well be a good idea. They can gather data and execute trades at rates that are beyond the individual human trader. Whilst there’s no magic way of winning the trading game, swing trading bots are another tool that can certainly improve your chances. To find out more, why not try to sign up to a platform life AtoZ Markets and take advantage of a free trial?
Swing Trading Bot – FAQ
🤖 Can I use a bot for swing trading?
Trading bots and algorithms promise to revolutionise the world of online trading. However, there is some confusion over what they can and can’t do. Some bots are customisable and can be set to adhere to a specific trading strategy, decided upon by the trader. Others can actually open and close trades automatically, without the need for constant intervention.
☝🏻 Are swing trading bots legal?
Different countries have different laws when it comes to trading – and this extends to the use of trading algorithms. If you are uncertain, then the best thing to do is find out what the rules are in your country and ensure you are up to date with the latest regulatory information.
🤔 Where can I get a swing trading bot?
Before searching for a swing trading bot it’s important to ascertain exactly what you are looking for. Spend some time considering what your goals are and make sure you understand exactly what bots can and can’t do
🤷♂️ Do I need to understand programming to use a trading bot?
Many advanced traders choose to build their own bots from scratch. Others might prefer to download existing code and tweak it for their own needs. However, there are also plenty of platforms that offer user-friendly bots with simple user interfaces. Which bot you use will depend on your level of programming know-how.
💰 How effective are swing trading bots?
It’s hard to find consistent data on the efficacy of swing trading bots simply because there are so many factors to consider. However, if you are considering using a bot for the first time, it’s important to be aware that they are not a magic ticket and cannot guarantee results.
