The development of online trading platforms has been carried out in parallel with the expansion of FinTech. In very simple words, FinTech is the combination of Finance and IT expertise. Naturally, this has led to the creation of numerous supports making the financial markets more accessible to a new kind of individual traders who are not from the stock market. In fact, several projects have been studied to make the decision-making process even simpler via software that would automatically take care of the management of a portfolio of assets. This is how the trading robot came into being
What is it exactly? How does it work? Its advantages, disadvantages and risks? How to choose it? We will sweep all these themes for a global understanding of this very attractive phenomenon.
What is a trading robot?
A trading robot or bot advisor is a computer software application that allows the autonomous management of a portfolio of defined assets over a given period of time. A trading robot opens and closes positions according to a strategy that has been given to it by following an algorithm that is supposed to lead to mostly profitable decision making. There are several types of trading robots depending on the basic parameters taken into account to exploit the full potential of the robot.
Types of automatic trading robots
There are 3 main types of these, based on various fundamental elements:
- the type of market
- forex (currencies)
- binary options
- the type of development platform
- an Expert Advisor (EA) MetaTrader
- other platforms
- the type of investment / strategy :
- scalping or short-term positions with high volatility and high risk
- the long term with a more controlled approach
- binary options
Criteria to be taken into account when making your choice
Here we present the criteria we consider relevant to consider when deciding which auto trading robot is more reliable than another. These criteria deviate as far as possible from subjective notions.
Free or paid software?
This is the first question to be asked. Is it essential to buy automatic trading software? Is it profitable in the long term? As with many other services, just because a product is free does not mean that it is necessarily less good than paid software. And vice versa
Some brokers offer their own version of the trading robot for free when a real money customer account is opened. Software that is often very reliable and powerful. FinTech developers have developed cutting-edge financial market analysis software with outstanding performance announcements. These products are paid for by monthly subscriptions or very variable purchase prices. With a good knowledge of coding and finance it is possible to create a customised trading robot.
Have trading knowledge
While the promise of a trading bot is to automatically steer your portfolio and grow it significantly, it is essential to understand what trading is and how it works in order to set it up properly. Don’t use automatic trading software if you don’t know what online trading is all about.
It is vital to understand what the algorithm and general strategy of the trading robot is based on to determine its investments.
Stay alert for excessive use of over-optimization of your automatic trading software. Your settings are pushed to extreme profitability over a short period of time.
Backtesting your forex trading robot
The aim is to test the efficiency of a forex trading robot in real conditions. You position it on the chart of a past period for which you know the trends. You launch the software on a given time. Then you point out the good and bad positions. Then you record the gains and losses. This allows you to have a factual inventory (in manual or automatic mode) to evaluate the success rate of a trading robot.
Use the demo account
If you have the opportunity to confront a bot trading on a demo account, do so without hesitation. This is a unique opportunity to see the effectiveness of such a software in an unknown real situation without taking any financial risk. If the trading bot reacts positively in Demo it will do the same in real account.
It makes sense. However, think about testing one to compare it to the others. Integrated or not in a platform? Free of charge? Optional / monthly subscription? Expert opinions and reviews? Pay software to download ? Put down all this data to choose which option is most attractive for you.
How to set up your automatic trading robot?
If you or someone on your team has the required IT skills and advanced knowledge of stock trends and financial markets, it is entirely possible for you to develop your own automatic trading software that integrates with a platform such as MetaTrader or ProRealTime with all their analysis and interface configuration tools. Thanks to these solid foundations, you can then make a customised and advanced configuration of your user preferences and algorithmic calculation methods that allow instant decision making by the trading robot
Even if the importance of the different elements varies according to the version of the automatic trading robot developed, the main criteria weighing in the orientation of order placement are stock market trends (based on analytical charts) and the level of volatility of the products. When these two notions are correctly handled by the trading bot the basis for decision making is laid.
Then comes the parameterization of the trading robot in practical cases. It is of course possible and highly recommended to give a direction to your automatic investments. How can you tell an automatic trading robot what is expected of it? 5 criteria are generally configurable to refine its action:
- the level of risk you wish to incur: low, measured or high. Depending on this data, the trading robot will opt for more or less aggressive positions over more or less long periods of time (see the over optimisation section)
- the type of trading you want if your software is multi-product: forex trading robot, CFD trading robot or trading bot binary options
- the type of products you wish to be taken care of. Currencies for example for forex
- the time of use with a defined period. Namely that a bot can trade 24 hours a day, in the time zones of all the world’s stock exchanges, without getting tired
- profit and loss limits
The configuration of your automatic trading software is essential to limit losses and maintain significant profitability. The prerequisite of having knowledge of online financial investment makes sense.
Which brokers to turn to?
There are many online brokers who offer an automated trading service. With immediate access, optional for VIP accounts or downloadable in paid version, the packages are as varied as the providers. Leaving aside in-house trading robot software, two main families share the market: specialised platforms and classic online trading platforms.
Robot trading sites
These are brokers who have opted to offer a single formula approach where the trader only has access to online investments in automatic mode after setting up his investment strategy and the type of financial instruments to be traded. The software developed is supposed to be the best trading robots on the market since the whole concept of the broker rests on it. Reliability is apparently not a fundamental criterion according to the feedback from some users
Despite this, some online trading sites stand out from the crowd with motivating performances. These include Gold Binary Bot, Copy Op, Best Trading Robot and Copy To Win.
Certainly the most widespread on the market. At least the most visible ones since their automatic trading robots are one of the many investment possibilities. They should be considered as an additional service offered to traders. Attractive for beginners who hope to make gains without too much difficulty. Consolidation for experts who can strengthen their funds by diversifying their stock market investments. At present, almost all online brokers have developed a trading bot, with varying levels of results. We will present the two that we find interesting: IQ Option and AvaTrade.
Many observers say that IQ Bot, the automatic trading robot of the IQ Option platform, is surely the most reliable and profitable on the market. Easy to set up and follow. The basic investment is $100, which is quickly amortized by the profits made.
For 10 years the broker AvaTrade has been striving to stay in the race for the best forex broker. Between its updated interface for a very intuitive ergonomic comfort and its software development the online trading platform has a bright future. Thanks to its forex trading robot it proves that trading currencies automatically is safe, fast and efficient, while respecting a trading strategy and its capital.
MetaTrader, the best trading robot?
Just as there is a rivalry between the Windows and Apple operating systems, there is a continuing battle between MetaTrader and ProRealTime trading software. Knowing what kind of software infrastructure the broker you are using is of real importance.
Let’s start with the outsider ProRealTime, which has undergone a masterful technological evolution in recent years. It has won a lot of technical awards, whether by a popular vote of traders/customers or by experts in trading platforms. Its fluidity and reactivity are its major assets. This is why it adapts very well to the grafting of a trading robot, regardless of the broker who operates it.
In the other corner is MetaTrader, which has nothing more to prove. The platform equips most of the reputable brokers. First there is its multi-level approach with MetaTrader 4 for beginner/intermediate customers, and MetaTrader 5 for the more experienced with its advanced analysis and charting tools. MetaTrader is known for its great flexibility and adaptability to the needs of the online broker. The platform is highly reliable with few crashes. The basic analysis tools are excellent bills. It is the most suitable answer for Market Makers, who reproduce financial market conditions in real time. This naturally makes it an ideal field for the development of the best trading robot on the market. The latter can apply the order placements that are most correlated with a changing stock market situation.
Our last piece of advice: watch out for scams!
The idea of being able to earn money without doing anything is obviously tempting. Unfortunately this leads to far too many attempts to promise miraculous trading robots with hallucinating rates of return
As with any other product, be wary of advertising effects that seem too beautiful. Inform yourself by all the means at your disposal: technical data sheet, opinions and reviews from experts such as Bestrade.org, practical test (as suggested in the selection criteria). Also pay close attention to the conditions of access – free of charge, subscription, purchase, minimum deposit – which must be justified. Remember that just because it’s free doesn’t mean it’s bad. However, you can quickly fall into an infernal spiral that absorbs all your profits with zero or even negative profitability.
Some automatic trading robots are clearly developed by brokers in order to attract new customers, with a dishonest policy that leads to inevitable bankruptcies
Keep in mind that, without all this, the risk of losing one’s starting capital with online trading already exceeds 70%. You might as well take your time before embarking on a new adventure potentially out of control.
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