What is a robot trading?

Robots in trading are now well known and used by lots of institutions an enterprises. But it works? We give you all the details!

Wouldn't it be great to have a robot trading and make guaranteed profits? It is the dream of many people to find the perfect computerized trading system that guarantees profits, and which requires little information from the traders themselves. Although there are many automated trading systems, there are some pressing questions about these systems that need to be answered.

What is automated trading?

Automated trading systems, or automated trading, allow traders to establish special rules for the entry and exit of trades that can be done automatically by a computer. Entry and exit rules can be based on simple conditions, such as a moving average, or sophisticated strategies that require a full understanding of the specific programming language of the user's trading platform.

It is commonly observed that people who get involved in trading do not really have much knowledge about the process. Not surprisingly, this is one of the reasons why automated trading systems are so popular. For those who want to start trading, all they need is a computer with an internet connection (you don’t even need a big investment to start). Automated trading tools allow traders, especially novice traders, to set limits in advance, ensuring that their trades stay on track. On the other hand, manual trading can increase the risk of emotionally investing in a transaction and of not making the best decisions.

How does robot trading work?

In general, these robots require the software application to be linked to a direct access broker, and any particular rule must be written in the proprietary language of this platform. For example, the most popular platforms use the MQL programming language, while others use the NinjaScript programming language.

Some automated trading platforms have policy "wizards" that allow traders to choose from a list of commonly available technical indicators to create a set of rules that could then be exchanged automatically.

Users can also enter the order type (for example, market or limit) and precisely when the transaction will be triggered (for example, when the next bar is opened or when the bar is closed), or they can exploit the default inputs of the platform.

While automated transactions may seem attractive for a variety of reasons, such systems should not be considered a substitute for carefully executed transactions.

Mechanical breakdowns can occur, and systems require ongoing monitoring. Server-based platforms can be a solution for traders who want to reduce the risk of mechanical failure. It is recommended by many professional traders to adopt a hybrid approach consisting of manual and automatic trading to obtain the best results.