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My trading robot

Started by Admin, Sep 27, 2023, 07:52 AM

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Topic keywords [SEO] TRADINGRobottrendtransactionscountertrendarbitrage


If the mechanism of transactions on one particular exchange can be modified using algorithms and a trader themselves is not able to (or does not want to) personally process the entire amount of data, it makes sense to let a robot be in charge. In the last decade traditional brokers in the foreign exchange market (Forex) worldwide have been slightly pushed back by so-called trading robots, specialized computer programs for stock trading. The task of trading programs is not only to help traders with routine work. Their overarching goal is to implement trade strategies that are difficult or impossible to implement by hand.

A trading robot is a program that partially or completely replaces a person working in the Forex market, meanwhile, a robot can be managed by a trader (for example, a trader accepts opening/closing positions) or operates according to a pre-programmed methods. Robots that conduct trades independently are nothing more than mathematical algorithms which monitor the values of various indexes in Forex and they make transactions on the basis of that data. The average number of transactions made by a trading robot is several times larger than the number of transactions made by people.

Experts usually divide trading robots into three groups: trend, countertrend and arbitrage. They correspond to different types of trading strategies. The usual task of a trend robot is to catch the tendency of growth or decline of quotations as early as possible and open a position; then it is supposed make a well-timed decision on whether there will be a trend reversal and fix the profit (meaning, sell currency pairs). Countertrend robots try to catch all the price setbacks; they work especially well when the market is flat. In turn, the arbitrage robots should make a profit by determining the price imbalances for identical or closely related assets in different markets. Also, robots can be divided into indicator (used as indicators for opening and closing trades) and candlesticks (used as opening and closing signals for combinations of candlestick patterns).

Experts say that it is not difficult to write a program and none of them can say "my robot is the best one", the main thing is to choose an effective trading strategy. Today, according to some estimates, robots account for 30-50% of transactions on the stock and currency markets worldwide. Mechanical trading systems are considered to be one of the most effective and reliable methods of trading. First of all, automatic trading helps traders to sell large packages of securities. The order is divided into several small ones and they are gradually placed on the exchange using a certain algorithm.

During usual trading days, a robot makes decisions automatically and conducts operations without allowing subjective evaluation to prevail objective technical calculation. It is believed that robots are more effective for short-term intraday trading which is usually built with indicators of technical analysis. The advantages of trading robots can be attributed to:
  • Lack of emotions – it helps when it comes to fixing losses, i.e. selling declining assets.
  • Speed of processing the incoming data - the robot can track data on hundreds of instruments at any time.
  • Quick response – it takes mere seconds from the moment of signal receipt to the opening (closing) of the position.
  • Fully following the trading strategy without any deviations.
  • The fact that trading robots do not experience fatigue and start work right after it has been switched on.
  • Robots can trade hundreds of assets simultaneously, which an ordinary person can never do.

The disadvantages are:
  • Risk of errors in the program code.
  • Primary use of technical analysis.