Trading has also been influenced by technological advances, so much so that it is possible to make money in the market without even being in front of the computer.
In this article let’s talk about trading robotsa solution for those people who like trading but do not have time to spend many hours in front of the computer. Thanks to this, we can operate 24 hours a day, something that would not be possible without automation.
If you want to learn more and know if this solution is what you need to make money with trading robots, don’t stop reading.
- What is a Trading Robot?
- How Automatic Trading Robots Work?
- How to create your own Trading Robot
- Types of Automatic Trading Robots
- doWhich Broker allows to use Trading Robots?
- Using Automatic Trading Robots: Advantages and Disadvantages
- Opinion on Automatic Trading Robots
What is a Trading Robot?
trading bots they are nothing more than computer software which is based on a set of signals that the trader programs and based on that the chosen assets are bought or sold.
These signals should be chosen with caution and after research so that the operations can be successful, so it is not advisable for beginners or those who do not yet have adequate knowledge about trading.
trading bots offer the advantage of being able to operate in the market 24 hours a day; something that would not be possible for humans. Additionally, these software can simultaneously analyze multiple markets, allowing them to find opportunities that would simply be beyond the reach of any human trader.
For trade you need objectivity in decision making when you are trading. Otherwise, your results are going to be affected by your interpretation, and here’s a nice extra factor for getting you wrong. How can you correct this? Trading systems or robots allow an objective approach to the market.
On the other hand, precision in terms of execution when trading is key. When you trade manually, you analyze, wait for the moment and execute the order. When the process is automated, the order is released in less than a second without hesitation, analysis or thought.
How Automatic Trading Robots Work?
It is really simple for a trading robot to execute the lines of code that the programmer has inserted in the EA (expert advisors) of your broker.
Trading bot code
Like any computer program, a trading robot is based on lines of code written in the form of a specific programming language. The example that I show you below is the code of a Forex robot to use in Metatrader 4:
Type of trading system
We have to tell our robot through code, when to perform the operation and when what parameter happens. When this happens, the robot will carry out the order at the exact moment.
For example, if we want to operate average crossovers, we will program as follows:
- Look for a buy signal if the price is above the long-term simple moving average.
- Open a buy position if the first condition is met and the two short-term moving averages cross up.
- Look for a sell signal if the price is below the long-term simple moving average.
- Open a short position if the third condition is met and the two short-term moving averages cross downwards.
To this system you can add any filter that you consider appropriate. For example, a directionality ratio that confirms the trend.
Placing stop loss and take profit
Before making any input, the robot will have defined at what maximum and minimum distance it will place our stop loss.
To place our take profit we can do two things;
- The first option, place it at the same distance at which we placed our stop loss. This would give us a kind of risk benefit ratio of 1:1. That is, I risk €100 to win the same €100.
- The second option, if we are looking for operations with a greater profit path, it is to place the take profit at twice the distance from the stop loss. This would give us a risk/reward ratio of 2:1. That is, I risk €100 to win €200. This will always be somewhat more difficult to achieve, but it can be more profitable.
An example of how the stop loss placement would be scheduled:
ConfirEntradaStopV= (SLV-(Low+confirmacion)) * 100000;//Calcula el stop en base a la vela anterior para ver si es mas de 30 o menos de 70 y realizar la operación if (ConfirEntradaStopV < TickStopLossMaximo && ConfirEntradaStopV > TickStopLossMinimo)
How to create your own Trading Robot
To get an automated trading system we need to have programming skills and know the problems of processing applications, or hire someone who knows for us. But first we can start with the expert advisors, trading robots, from the free code base library that it offers us. MQL5.
Download any expert advisor (trading robot) and run it in the strategy tester of the client terminal of Target Trader 4. Select a history interval with a strong trend and another interval that is flat. Performs optimization of the input parameters of an Expert Advisor and examines their differences on these two intervals.
Runs an expert advisor with the optimal parameters for a fixed leg on a trend interval and with the optimal parameters for a trend on a fixed interval. It examines the differences in the results of the transactions, distribution of contracts and other statistical parameters. You will see how much the behavior of your trading system can vary with changes in the market.
It would be better to try various trading strategies with this method in different parts of the history and with different symbols. With these tests you avoid using a trading system in a defined historical interval and you get a better understanding of trend and countertrend systems.
You must learn to identify the most relevant input parameters that affect your trading system from the entire set of input parameters. Don’t pay too much attention to time-consuming secondary parameters during optimization but don’t affect the system logic.
Remember that a good trading system always shows a small free movement of secondary parameters but does not show the drastic volatility of insignificant market changes.
Knowing the strengths and weaknesses of standard systems will allow you to be better prepared when creating your own trading robot.
Types of Automatic Trading Robots
Basically the different robots they differ in how they handle the stop lossand based on this there are three types of robots:
1. Tight Stop Robots
this kind of robots has a profit curve with quite a few profit peaks and stop loss valleysthat is, a curve with many irregular saw teeth.
It is the one that can offer us the best result and therefore the one that everyone wants to achieve, the one that is most profitable.
two. Robots with a long Stop
The profit curve of this bot would be similar to a letter Nrising steadily, until it hits the stop and has a big drop, to continue again with a constant upward curve.
They are easier to build, easier to program, and need somewhat simpler strategies to operate with them.
3. Robots without Stop Loss
In this case the profit curve would be a constant straight line upwardsbut with the danger that at some point the draw downwhich is that we can accumulate losses equal to all the money that we have accumulated in our account in such a way that the broker would make us a margin callwhich means that our unclosed losses are equal to all the money we have in the account, and it simply closes all the operations that go negative, leaving the account at zero and melting the account.
This robot is not that it is bad, it is simply that you should never trade automatically or manually without stop loss.
doWhich Broker allows to use Trading Robots?
The most frequent platform for the use of automatic trading systems is MetaTrader 4 with an Expert Advisor.
MetaTrader 4 stands out for its ease and flexibility when programming Expert Advisorsmaking this type of operation easier for users.
After having tested and analyzed numerous online brokers, in the following table you can see those that we consider as best brokers for auto trading depending on the spread they charge.
Using Automatic Trading Robots: Advantages and Disadvantages
Now that we’ve been breaking down what a trading robot is for a while, how it works and how you can make money with them, I think it’s time for me to make you a summary of the advantages and disadvantages that trading robots bring us.
The advantage of automatic trading robots is that there is no one person and all his psychology behind stock market orders. A robot does not regret once it closes an order or when it has losses. Y the psychology of the trader can play more than one trick on him.
- Speed of execution
- Objectivity, without hesitation in making decisions
- Flexible trading hours, the robot will lose effectiveness after many hours of activity in the market, unlike the trader.
- auto trading robots they do not have the artificial intelligence to adapt to market conditions. That is, they will always work in the same way that you programmed them.
- Before buying any robot, make sure that they do not use these techniques and that there is no one hiding under a brand that may disappear tomorrow.
Opinion on Automatic Trading Robots
Forex trading robots they can be a great help, as long as you use them correctly. If you don’t have a lot of trading knowledge and are just looking to make money fast, you better invest some money in trading training.
Secondly, if you are an experienced trader looking to automate your trading or earn additional money, you may consider buying or create your own trading robot.
As we have commented before, within the most important advantages that I consider that can help us is the speed of execution, the great capacity for scanning operations and that it does not rest. It always works the same way.
On the contrary, If you do not know how to program your own trading robot, I advise you to look for one with cautionbecause there is a lot of scam with this type of product online.