Automated (or algorithmic) trading is using autonomous computer programs to management positions in the financial markets.
Robot traders open positions and close them like manual traders. Automated trading is also: a simulation of trading strategies on historical prices (backtest) to obtain a detailed and objective performance report.
Each system parameter can thus be optimized and improved: calculation of the best entries and exits.
Using alternative trading techniques such as scalping (orders of a few seconds, execution speed is essential), artificial intelligence (recognition of chart patterns, neural networks, etc.), and many more.
The money management, margins, risk exposure, dynamic stops on orders, etc. are adapted to the trading system. Namely, individual traders can very well apply robots to their trading accounts. Brokers allow, and even encourage, this practice…
Why use automated trading?
A robot aims to automate repetitive tasks. The first good reason to use a robot is, therefore, regularity. As much as a discretionary trader may not respect his trading plan (which happens frequently), a robot is programmed to follow trading logic without possible error.
The risk will always remain under control. Running several different robots simultaneously on the same account can be a great way to smooth out performance.
There are many other arguments in favor of robots. Everyone will find their own.
A robot will surely be helpful if you need: speed in the execution of orders, react in real-time to buy or sell signals, perform complex calculations to be able to trade 24 hours a day on several markets at the same time increase risk control (multiple security) verify the relevance of specific strategies to perceive “hidden” data such as the number of ticks or the average spread over the minute …
Developing a trading robot also requires taking into account all market data (hours, prices, orders, etc.). Exercise is often challenging. However, statistics show that robot users, on average, perform better than discretionary traders!
And if you are a beginner start with Biti Codes IO, s a crypto trading app based on the reward system.
How does it work?
There are two solutions to set up an automated trading system: APIs: and computer protocols allowing direct communication with brokers’ servers. We are here in the context of pure algorithms; there is no graphical interface, no tool outside the code.
These APIs are mostly useless in the case of an independent trader. Trading platforms: software that manages the display of charts, quotations, and various functionalities (order book, news, journal, etc.).
More and more platforms also include a coding module to develop indicators, scripts, and robots. In this second category, we can cite Metatrader 4, the benchmark for individual traders.
The robots are called Expert Advisor, the associated programming language being MQL4. You can find some free or paid “ready-to-use” programs on the internet (just download the file and install it on your trading platform).
They are mostly intended for the Forex market. Some also apply to indices and commodities.
You can also develop or have your trading strategy developed by professionals.
It is, of course, better to leave such a program on a demo account to start with if you have little experience with it. Beware, however, of certain strategies that could give radically different results between real and demo (spreads, slippage, latency, etc.).