The world of online trading has undergone profound changes. We have gone from auction trading to automated trading (robot trading) through various technologies such as placing orders over the phone.
Computer trading programs now place most stock market orders. The widespread use of trading robots by financial institutions is no accident, they provide many advantages on both order execution discipline and profitability. Trading robots eliminate the subjective approach and emotions in trading.+
The robots can not only provide signals, but they can also place orders on behalf of the trader. They offer traders great flexibility to automate their trading strategies, monitoring price fluctuations and different market events.
The trading software is accessible to everyone, can be purchased or found for free on the Internet. Others are used by financial institutions and are kept secret.
Choosing a robot requires prior research. In this guide, we will see how to choose your trading robot and which are the best trading robots for beginners.
Trading robot: what it is and how it works
The trading robot, also known as algorithmic trading, is a type of strategy that uses software capable of identifying trading signals and translating them into investments and operations.
Sometimes they can be real programs, created by developers, who will analyze graphs to identify potential investments and, in some cases, operate.
This type of investment involves the use of special software, algorithms and codes and allows for the automation of the operations of buying and selling currencies, shares or other assets. In short: with the trading robot, traders are replaced by programs that autonomously enter orders.
Each trading robot is therefore different and works according to the chosen strategy, but in general, we can distinguish between:
- software that can be integrated with the MetaTrader 4 platform;
- CopyTrading, a prerogative of the eToro system.
The world of trading robots is therefore quite complex and if on the one hand it offers serious tools, you can also come across scams and opaque systems. In fact, we remind you that there is no software capable of ensuring profits in every market situation, even if it is an automated forex trading robot.
Does an fx trading robot really work?
The answer to this question depends a lot on your expectations of these tools. Forex robots are programmed to execute trade orders by replacing the need for the intervention of the real trader.
The trade orders that the robot will enter are determined by a series of mathematical algorithms set by their programmer.
For traders using a fully mechanical or automated trading strategy, forex robots can offer a solution that can trade on their behalf during the day and night.
The actions performed by forex robots are determined by the technical analysis tools with which they have been set up. The best forex robot programmers use a method called backtesting to ensure that their bots are designed to maximize profits.
The backtesting is the point where the programmer uses time series data to test how a proposed trading strategy would take place in real life.
It is possible to automate this process, but that would mean making adjustments to improve the robot's performance in areas such as maximum withdrawals and placing stop loss orders.
Although most forex robots "work" in the sense that they are programmed to automatically execute trades, unfortunately, they are not foolproof, so they cannot provide any guarantees of long-term profits.
On certain occasions, keep in mind that algorithms can be wrong because the markets follow a trend that is anything but logical and perfectly traceable.
Fx trading robot: advantages
Like all strategies, using a trading robot also has its positive and advantageous aspects. These advantages, as we have anticipated, revolve around the possibility of delegating much of the effort to a software.
Firstly, there is the ability of forex trading robots to spot many opportunities quickly. In fact, once you have set the parameters, it will be the same system to search and identify the investment alternatives present on the various world markets.
This way you can save time by not manually searching for instruments to invest in.
Another aspect that should not be underestimated is the zeroing of emotions. A trading robot is a software, and as such, it is not affected by emotion: therefore it is able to make cold calculations unrelated to reactions such as fear, instinct, or risk.
Therefore it will be much easier to apply your strategy, objectively and to the letter. Furthermore, at any time, you can always intervene and personally modify the strategy if it is no longer functional.
If you choose to do automatic trading you can also carry out multiple investments in parallel, balancing any losses and profits. It will therefore be possible to open positions on both forex and shares, monitor and invest in multiple markets.
Obviously, it is possible to diversify even without using trading robots, but thanks to these tools, management is easier and different markets can be combined. So if you want to start trading robotics, rely on authorized platforms such as:
- eToro, with its CopyTrading system and CopyPortfolio.
The disadvantages of fx trading robot
Even if an fx trading robot makes investments easier, you should know that there are also disadvantages when you decide to trade with these tools.
First, technical problems can occur. In fact, although the software is cutting-edge, it can be blocked, the internet connection can jump or mistakes can be made. Therefore, even if they are programmed machines, there is always the possibility of making mistakes, so better proceed carefully.
While it is true that with trading robots it is not necessary to continuously monitor trading, it is equally true that the software must be monitored periodically. As we said before, even if we are dealing with machines, we must always consider a percentage of error. So, if you want to avoid any nasty surprises, we recommend that you check back from time to time so that you can step in and fix your shot.
Finally, another mistake to beware of when using trading robots is the veracity of the test tests. In fact, you should never think that if the test is successful, the platform will always work optimally.
On some occasions, it may happen that the instrument used is effective in the testing phase, but operating with real capital it is not. In these cases, it is easy to fall victim to ultra-optimization, which is a situation in which the trader changes his strategy during the test.
Robot trading: the best brokers
If you have decided to robot trade forex you should know that there are many brokers, but only a few offer the best conditions and optimized tools or support automated trading.
Compared to manual trading, automatic trading has the advantage of not being dependent on psychological dynamics and can be done faster.
Furthermore, since we are dealing with trading robots, the rules are predefined and the tools operate on programmable sources as regards timetables, markets and assets.
eToro Trading Robot
There are many brokers that support automated forex trading robot, but those that are truly optimized for this operating mode are few. For private investors the best choice is eToro, which in addition to being among the best brokers, offers the user a unique tool, CopyTrading.
EToro's platform is also one of the easiest to use and offers a good number of assets for CFD trading including currencies, stocks, ETFs, indices, commodities, and cryptocurrencies.
Furthermore, before starting, it is still possible to test the platform and functionality by opening a free and unlimited demo account. However, relying on CopyTrading and CopyPortfolio means using few customizable tools, since the algorithm remains the property of eToro.
The eToro broker, in addition to being authorized and certified, offers one of the best alternatives when it comes to robot trading, or automatic trading: copy trading.
This tool puts in the user's hands the ability to copy the movements and operations of other traders. This will make it possible to earn and, at the same time, learn directly from those with more experience. In any case, CopyTrading is a simple system that allows you to avoid scams. If you want to do automatic trading with eToro you just have to:
- Open an account
- Make the minimum deposit of $200
- Choose from users who have invested in the market and who have good returns
- Deciding how much to invest, without necessarily investing all the capital and managing to diversify
- Close the copy, withdraw and get back the money invested
The eToro trading robot system is therefore extremely simple and allows you to invest by choosing from many different strategies.
eToro has taken a further step forward with the introduction of the CopyPortfolio offer, which selects and groups only the best traders, with the aim of providing an accurate list of who to follow and replicate, to further increase the chances of success.
For those who use trading robots or custom trading software, eToro is not the right choice as it does not allow you to apply them. However, for those looking for an immediate broker to do automatic trading it is a valid choice and to be taken into consideration.
MT4 automated trading robot
Other alternatives for trading robots is Capital.com, a regulated broker that allows you to robot trade forex on integrating their account with MetaTrader 4 software.
By being able to rely on mt4 automated trading robot, the user will have a fully customizable trading algorithm available without investment thresholds.
However, even MetaTrader4 has limitations as, in order to be able to master it properly, you must also know the programming language properly. In any case, the mt4 automated trading robot can simplify the trader's work, but it is necessary to remember that relying on these automations is not the only factor that leads to success.
How is a trading robot created?
Programming analysts are among the most sought after professionals in the field of online finance, precisely because the demand for automatic trading tools has increased dramatically in recent years.
Creating an automated forex trading robot from scratch would require the ability to write in the programming language (MQL) of the most common trading platforms (MT4 and MT5).
Some trading interfaces have simpler and easier to learn programming code than other platforms. The one for MT4 platforms is relatively easier to learn than the rest, with plenty of video tutorials available online.
The alternative is to purchase the software and then program the commands according to your needs.
Once you have installed the fx trading robot on your trading platform, you will need to test it with a free demo, in order to check how the bot behaves in a safe environment.
Automated forex trading robot scams
The most common type of scam are Telegram trading signals. Some robots may seem trustworthy, but they use risky strategies.
The world of online trading attracts many dishonest people because there are many newbies who are willing to invest their money. Scammers target newbies and profit from their naivety.
The trading signal scam
There are thousands of trading signal services on the internet, mostly on Telegram. However, most of these groups are unreliable, as they do not have a verifiable trading history. Before joining a paying group, you should first ask them about their audited trading history for several months.
Grid trading robots
Grid trading consists of opening several positions in a sequence of orders, often at regular price intervals. Most network systems trade without stop loss, but with take profit. Grid trading is based on the "hope" that even if the market does not move in the right direction, prices will sooner or later hit the take profit again.
The problem is that the price can move in the wrong direction of your trade so that you don't have enough margin to hold your positions. And these will be closed at a loss by your broker. A grid trading system is easily identifiable. In the trade history you will only see the winning trades because the positions which are in red are not closed by the robot. You will also notice a significant difference between the available margin and the account balance.
We advise you not to sign up for the copy trading service of such a robot, because grid trading is not a sustainable strategy.
Robots offered when creating a trading account
Some gurus will offer you a free trading robot if you create a trading account with a broker they recommend. It is often a lure to convince you to open an account with their affiliate links and thus pocket a commission. Trading robots offered on this basis are rarely reliable.
High frequency trading
Financial institutions use much more sophisticated MT4 automated trading robots. These high-performance programs can place thousands of orders per day.
High frequency trading has gradually gained ground on various exchanges around the world. This trading approach is based on sending a large number of buy and sell orders following a well-defined algorithm. High frequency trading is often used by financial institutions and requires powerful computers. However, some companies offer solutions to individual traders. High frequency trading robots are the most sophisticated programs in the industry.
The goal of high-frequency trading is to take advantage of the micro fluctuations of the market to make small profits on each position. Multiplied by thousands of positions in a trading session, this can make for quite large capital gains. High frequency trading robots must therefore be very fast, especially as competition is increasingly fierce for the best buy and sell prices in the markets.
Using trading robots is probably the easiest way to trade. Even those without trading skills can perfectly exploit this type of tool to make a profit. It is sufficient to follow the instructions already given to start the operations. However, choosing a trading robot is crucial and the conditions need to be read carefully before launch.