What is a stock trading robot and what types are there?
Is it possible to make money in the stock market using a stock trading robot? It is possible, but this is not a magic wand. You need to be able to trade using such a program. And what kind of robots they are and what you need to know about them, we will consider in this review.
What is a stock trading robot and what types do they have?
A stock trading robot is an automated program for trading on the stock market. These are its main types:
- Semi-automatic Expert Advisor – analyzes the chart using a special algorithm and displays signals to enter the market. The trader opens a deal on his account.
- An automatic trading robot – not only finds entry points, but also enters a position according to a programmed system.
- High-frequency robots open many trades per minute and work quite accurately, but they are not available to normal traders. Institutional market participants and market makers use them.
Do automatic trading robots work?
Can a stock trading robot make money? To understand what is needed for this, let’s look at the principle of its actions in detail.
A robot is an automatically executed algorithm based on a profitable trading strategy. Your task is to impartially read market signals and calmly open and close deals. Its two main advantages are automation and lack of emotion. But the robot needs to create conditions so that it can make money on the market:
- develop a profitable trading algorithm;
- program it correctly;
- timely adapt the algorithm to the conditions of the changing market environment;
- turn off the robot in time during important news periods (for example, before the publication of the quarterly report).
Now, the most basic: strategy. The best option would be to automate an already proven strategy that has stood the test and the test of time. So you can expect profit. But the robot will lose money if the algorithm is not profitable. No bad strategy can be improved by automation.
There are excellent trading systems that defy programming. There is in them a human factor that, in addition to logic, complements the conditions in which a deal is opened. Your robot will not be able to imitate.
Is it possible to entrust your money to an exchange robot?
A stock trading robot is good in capable hands. The best way to make money from them are professional traders who thoroughly understand their market entry algorithm and strategy. In this way, the trading robot will help, on the one hand, in opening positions, on the other hand, it partially neutralizes the influence of emotions. In addition, robots often outperform humans in speed, allowing them to get a deal at the best price.
Having found out what trading robots are, experienced traders can work with both a semi-automatic and a fully automatic advisor. But professionals, using robotic trading, carefully monitor the programs, make adjustments or stop the EA on time.
Is it possible to entrust money to a foreign exchange robot without knowing anything about the market? Especially if this robot is bought on the Internet? How lucky here. The outcome can be very unpredictable, as trading on the one hand brings great profit opportunities and on the other hand carries great risks for fans.
How to choose the best stock trading robot
In order for a trading robot to work for a trader and not against him, he must know well:
- on what strategy and with what profitability is it based;
- What market parameters is this robot intended for: what stocks in the sector can it trade, on what time frame.
- when to disable the program.
When working with an automated advisor, you need to monitor both the market and the robot. If the program is not written individually for you, but you bought it on the Internet, then first you need to test it on a demo account or in a strategy tester, find out its parameters:
- cost effectiveness;
- maximum reduction level;
- expected value;
- the maximum possible number of losing positions in a row;
- what should be the batch volume for the size of the deposit.
It’s good if you understand the market analysis methods that underlie the robot’s algorithm. This will allow it to be refined as market conditions change.
Where to look for a profitable robot? On the Internet on stock exchange resources there are ratings and comparative characteristics of the best programs for trading stocks. It is worth studying how they work, choosing the ones that best suit your criteria, trying several, and only after proven effectiveness connect the robot to a real account.