It is far from a secret that most successful traders use automatic trading systems controlled by a digital code – the so-called trading robots. Such programs are used for various kinds of financial transactions: cryptocurrency trading, stock trading, currency trading and, of course, in the stock market. Such a trading scheme on the stock exchange completely eliminates emotions and the human factor, which significantly increases the number of assets earned, reduces the number of gray hairs on your head and holes in your wallet.
Traders with a huge amount of experience, indicators, auxiliary reports, insiders, and even with their own strategy that works in 90% of cases, change manual trading to bots. Even such experienced players sooner or later come to automated trading through well-configured robots.
Why? Let’s get into details.
The main advantages of a virtual trader are:
- there’s no need to watch charts for days;
- there are no emotions, absolute composure even in very extreme situations;
- strategies/algorithms are always executed without the slightest deviation;
- the reaction speed of a trading robot to a signal is 1000+ times faster than a human;
- analysis and prognosis are on average 60-70% more successful than a person;
- a virtual trader saves your time – there’s no need to manually open/close deals, set take profits, stop losses.
- weak fundamental analysis (for example, people are better at taking into account the impact of the pandemic on the market nowadays);
- deviation from the standard situation on the market can lead a low-quality bot into a stupor and the algorithm might stop working correctly, which would entail losses;
- only an experienced trader with at least basic knowledge of coding can handle a successful and profitable bot setup;
- the market for free robots usually hides under the “mask” malicious programs that earn money for the first time, and then your balance becomes zero!
It looks very simple and understandable, but let’s still delve into the topic and figure out how it all works.
How trading robots work
Trading robots are by no means pieces of iron sitting at your computer, poking different keys, but automated traders, like people, with the only difference that these are programs that exactly repeat the actions of a trader.
A distinctive feature of a trading robot from manual trading is the amplitude and the number of open / closed transactions, since high-frequency trading robots have an enormous analysis speed and take into account forecasts by an order of magnitude more factors than a person could do.
In order for the bot to start working, it must be linked to the exchange on which you trade. Usually, the QUICK platform acts as a guarantor between the bot and the trader, which connects the bot with the exchange used. However, some experienced traders connect the bot directly to their API. This significantly shortens the chain to “Client-Server”, where all the necessary commands are already pre-programmed on the server. Using the list of commands, the client can get exactly what he needs at the moment. For example, it monitors current positions, sends trade orders, or changes the price range of an asset.
It is not a secret that trading robots have not been written from scratch for a long time, but there are a huge number of software solutions. The most popular projects are Amibroker, Neuro, Matlab, NinjaTrader, Astrend and even EXCEL! Quick, which I talked about above, also makes this list.
All trading robots operate according to a predetermined algorithm. Each bot needs to be “taught” to perform certain actions according to clearly defined parameters. Options include moments:
• position opening;
• profit fixing;
• fixing the loss.
It is important to understand that if some kind of emergency occurs on the market that does not depend on the exchange, the robot will not stop and will continue to work in the specified mode. Therefore, you should not take such a program for a mining computer for cryptocurrencies and regard it as passive income. Setting up a trading robot for the stock market is a very complex and painstaking process, which, alas, not everyone can do.
If you still decide to automate your trading process, here are a few skills that you must master in order not to lose your money:
• the English language;
• proven trading strategies;
• spelling of formulas/equations (math literacy);
• minimal skills in programming algorithms;
Do not panic, because such knowledge is required to debug the most complex bots, fully automated. Fortunately, there are robots on the market of different levels of complexity with a different number of features, which we will talk about next.
What types of trading robots exist?
There are two types of trading robots:
1. Automatic. They connect directly to the exchange and completely relieve the trader from any actions. All opening / closing transactions occur automatically.
2. Semi-automatic, or so-called signal robots. They are only half-participating in the trade: they perform technical analysis and send a signal notification about the trade that needs to be entered. Based on the information from the signal, the trader manually executes the trade and places orders on the exchange. Trades are usually closed at the discretion of the trader at the right moment, however, more advanced bots inform the trader about take profits and stop losses.
There are a lot of players on the market with different trading styles/strategies. Universal bots are quite rare, they are mainly divided into different classes. We indicate the most popular of them.
The most standard type of bot. The code is based on the fundamental analysis of moving EMAs. We do not recommend using it on cryptocurrency, since the “fundamental” is only a small part of the “crypto” analysis.
This program trades according to the Martingale rules. Not the best choice, because in this model the player raises the stakes until he wins. Suitable for very experienced traders with a large stock of assets and a mathematical mindset.
Based on the name, it can be understandable that this bot is programmed to collect a large amount of informational data. Finds key events from a variety of news resources. It studies supply and demand, eventually compares these data and predicts the future price of the asset. It is important that when choosing such a bot, the client must carefully choose the time periods for the software to work.
Refers to semi-automatic robots. This model does not use any indicators or other methods listed above. A trader manually opens/closes positions based on data from the robot about price fluctuations. Suitable for experienced players.
The most correct choice for an inexperienced trader. In this program, transactions are made according to average indicators, in most cases the code is written according to the Fibonacci grid. There is no stop loss here and usually the game is played in the medium term. This robot thinks through the steps for several actions ahead, opens or closes positions by itself.
The most expensive product on the market. This is justified by the complexity of writing such bots. This software analyzes the movements of various currency pairs. Contract risks are insured by hedging, that is, by opening trades in one market to offset the impact of price risks from an equal – but opposite – position in another market. The income here significantly exceeds the losses, therefore, the risks are very small.
They work on the basis of the analysis of the trend line indicator. The bot analyzes a large number of instruments for trend line reversals and enters positions on its own.
Favorite of many players in the market. The principle of operation is to make a huge number of transactions with little profit, but in the aggregate such a bot can generate good income for the client. However, he is much riskier than other classes of robots. Not recommended for inexperienced traders. It is well suited for cryptocurrency exchanges, as the volatility in the market is much higher, therefore, more transactions are made.
This assistant should be used in conjunction with the trend one, but not at the same time. He trades on the exchange within the horizontal price range, the calculation is made by various oscillators. During the period of trends is not effective.
How to choose the right robot for trading?
Choosing a robot for trading on the stock exchange is a rather complicated process. We repeat: a trading robot will not help you if you have not yet learned how to trade on the stock exchange manually. The bot only automates your work.
The main selection criterion for an experienced user is directly profitability. To find out the profitability of a particular bot, you need to conduct back tests. Usually, tools are tested on demo accounts (not all exchanges provide such an opportunity). The bot should be tested for 1 to 2 months before launching it on a regular account with your assets. The profitability ratio is calculated according to the formula: gross profit (sum of successful trades) / gross loss (sum of losing trades) = X
If X < 1, then such a robot should not be used, it will only bring losses.
We have prepared a small list of instruments that have passed our back tests and have a yield ratio of over 1.2.
Top 5 best bots for different trading strategies:
1. СScalp is a scalping tool, user-friendly interface is very easy to use, there are a lot of training materials on the Internet.
2. “New Logic” – a versatile and highly advanced robot from the New Hope team. A large number of useful features, of which HIDDEN stands out – bypassing the security of almost all possible exchanges. In simple words, the exchange sees you as a person, not a robot. This saves you from a bunch of plug-ins and additional software.This feature is very important for HFT trading.Using this product is only for experienced traders, this is hardly suitable for beginners.
3. Zignally.com is an excellent semi-automatic cryptocurrency signaler, suitable for beginners. Huge coverage of various instruments – signals come both for SPOT transactions and for trading Futures contracts – this is a rarity for the market.
4. Funnel Trader – works on the principle of hedging. Our advice is to use this bot in Asian sessions, it will greatly increase the longevity of your account.
5. Trio Dancer – works according to the Martingale strategy described above. It is important to use this tool with a large deposit. The lowest possible risks compared to competitors.
How to choose the right broker?
Not all exchanges allow trading assets using third-party software. We already know that the hallmark is the speed of the tool. Such quick transactions are often recognized by the exchange and soon the accounts are blocked according to the rules of a particular exchange. Below is a list of the main brokers that allow you to use high technology (trading bots) on their own platforms:
• Interactive Brokers
• CMC Markets
A trading robot can become your ideal partner only if you choose the right program for your style. An automated system never succumbs to human emotions and does not deviate from a given vector, which significantly reduces risks and increases your income. At some point in life, every person wants money to work for him, and not vice versa.
Trading robots are a great way to save time to devote to yourself or your family. Nonetheless, it is important to always remember that bots must be closely monitored, since no one is immune from technical failures and emergencies. They will not save you completely from work, but they will definitely make life easier with the right approach. But if you make the wrong choice, you risk being left with nothing.