What does a Trading Robot or automatic trading mean?
It’s a type of trading where a trader doesn’t physically open a trade, instead it’s a program trading on behalf of them.
A lot of beginners, but also many experienced traders are using this new trading technique. It has grown in popularity over the past few years due to the introduction of new software or “Expert Advisors“.
How does a trading robot work?
A trading robot is a software developed by experts, which can make decisions on the market. It makes decisions by analysing different market patterns and using various indicators.
For instance, its instruction code could be: ‘if the markets drops more than the 4%, then sell it’. The trading robot would then follow this command for a trader.
There are many expert advisor packages available, and some come already built into trading platforms. However, it’s important that the developer considers the following points which can affect the quality of a trading robot depends on different factors:
- the developer must know how the financial world works
- the developer should know how to code to avoid any kind of errors
Every trading robot allows you to set the level of risk you want to take in your trades, the leverage, the maximum margin plus the amount of money to trade for every single investment.
The chosen risk will be used to set up the levels of stop loss and take profit in each trade.
Trading Robot- MetaTrader Platform
It’s likely that you’ve heard of the MetaTrader platform. That’s because it’s one of the most popular trading applications around for Forex and CFDs. A trading robot is developed with the same code as the MetaTrader platform, this means it’s possible to develop and use your own expert advisor on it.
The MetaTrader platform- which comes in 2 formats (the MT4 or MT5), is offered by many brokers alongside their own WebTrader platforms. It remains popular because of the option to use the expert advisor.
So if you’re interested in developing your own expert advisor, using the MT4 could be a good option for you.
Does a trading robot work?
There are different opinions about trading robots. Some traders prefer not to bother with them, and others rely on them to do well and make profits.
What we can say though, is that it’s a very good help for traders who haven’t got much time to trade. Or if they don’t have enough trading experience.
Two of the most popular reasons to use a robot is that they can easily scan multiple charts and figures in a way that’s impossible for humans. Accessing so much information in a super fast amount of time allows for more data to be assessed- a lot more compared to what a human trader could manage.
Secondly, another bonus of using a robot is that they’re implanted with signal codes for trading. This allows them to suggest ways to find profitable trades in uncertain markets. The trading robot can also determine when to trade or not.
However, it’s very important to choose a good product. You can research yourself by reading other trader’s reviews of expert advisor products and by comparing prices.
Usually the quality level is reflective of the product price.
It’s important to remember though that when it comes to human vs machine, that machines such as trading robots are not perfect. Like humans, robots can also make errors occasionally.
That’s why it’s really up to you whether you feel comfortable using a trading robot or not.
What we would suggest is to research and read many reviews before buying a product. Plus check to see if there is a free trial of the trading robot available. That way you can test the expert advisor first to see if it’s suitable for you.
Otherwise it’s always better to invest your time in developing your trading knowledge and gaining experience. That’s the classic ‘human’ way in which you can learn to trade by yourself.
To start developing your trading skills, the best thing to do is to learn how to trade and how the main trading strategies work.