Also known as automated trade systems or expert advisors, trading robots are software that can manage open and close trades according to a pre-programmed pattern. Since automated systems cannot perceive the market as humans, they work according to math probabilities. Usually, the developer uses historical data of the assets that the software is designed to operate to verify if the robot can make money.
Some myths about trading robots
Are trading robots profitable?
Yes. Most of the trades on the market today are being executed by software.
Do trading robots use AI and Machine Learning?
Depend. They usually do not use those advanced technologies. In other words, most trading robots use conventional programmed language. However, it might be possible that big corporations use advanced software to trade.
Can they become crazy?
It is unlikely to happen. There are no cases reported about that issue. They usually do what people programmed them to do. However, they can stop working in some cases because of system failures, like a poor internet connection or another systemic issue.
What are the advantages of using a robot?
There are many advantages. First, it can analyze the multiple market assets with unlimited indicators every second without distraction. People do not need to stay all day long behind the screen looking for opportunities anymore. Second, it takes actions according to math rules which protects people from emotional traps. Third, it can execute trades at an ultra-high-speed that humans simply could not do, maximizing the opportunities to enter and exit trades. Fourth, most of the strategies can be automated using the technology available nowadays. Fifth, it allows people who are not full time traders to be on the market.
What are the disadvantages of using a trading robot?
They cannot perceive the reality outside the chart. If a significant event happens and for all human traders buying or selling a specific symbol is very clear, it is not for the robot. For example, let’s suppose that the CEO of a critical company dies in an accident; the stocks of that specific company might decrease depending on how the stockholders see the CEO. In that case, the robot will not perceive that movement in the market as the humans. Another disadvantage is that it can have failures in the code that the trader is not aware of and behave differently from expected. However, most platforms that run robot trades support backtests.
Do you recommend using expert advisor?
I do. To sum up, trading robots are efficient tools. Most of my trading accounts are running by trading robots, and all of them are positive accounts. For instance, LIK is one of my strategies ruled by an automated algorithm system.
Suppose you decide to use an expert advisor in your account. First, I recommend you backtest the robot features and settings. Second, I recommend you load the expert advisor in a demo account. After those steps, you can run the expert advisor in live account. But, you must remember that the robots are susceptible to the internet connection to work accurately. So I strongly recommend you use a private server close to your broker to avoid those issues. For this specific case, I would recommend you use FXVM services.