Would you trust AI or a robot to handle your day-to-day trading? Well, it turns out many in the industry are already doing so.
Automated trading bots have been around for quite a while thanks to fintech (financial technology) advancements over the years. However, individual traders now have easy access to this technology, previously only available to investment firms.
Daytrading Bot Saves Time For Traders
You no longer have to spend the entire day sitting and watching the forex trends. For instance, if you are a day trader, you can easily create, customize, or buy a daytrading bot that does the work for you, ensuring a quick return on your investments.
A study conducted by Wall Street shows almost 60%–73% of the equity trading in the USA’s financial market is automated. Though it seems all bots are equal, some are more equal than others—in case you heard someone getting scammed using one.
Nothing offers a 100% guarantee of success in this constantly shifting market. Thus, aside from the lucrative promises, you may get very little out of your bots if you don’t ensure that the claims they make are supported by reliable statistics.
However, with a proper understanding of what these automated bots are and how much they can offer, you can get your way around them easily. So, let’s get digging.
Explaining Automated Trading: What Forex Trading Bots Are and How they Function
A forex trading bot is a piece of code or algorithm that is programmed to purchase and trade assets more quickly and efficiently than a person. Simply put, automated trading or trading bots are just simple programs that complete some specific tasks based on predefined conditions.
These trading bots make trading choices based on predetermined criteria using a wide variety of data. Using technical indicators and emerging analytics, a trader may even impose restrictions, such as the entry and exit criteria for simple events like moving average crossings.
In order to execute a deal, trading bots typically go through three steps. Firstly, the bot gathers information faster than any individual investor could do, by using data analysis.
The bot then determines probable trades using that data and the predetermined trading settings. Finally, the deal is then carried out by the bot.
Reasons Why Individual Investors Are Choosing Trading Bots
Knowing when and how to utilize automatic trading is the most crucial component of success in the forex market. For a veteran trader, customizing and conditioning a bot for successful trading is going to be much easier than for a beginner.
Let us look at why many people believe trading bots can make their jobs easier.
Removing the Emotional Barrier
Despite having access to a variety of analytical tools, graphs, and models, traders can still be readily influenced by many emotional factors, which frequently result in mistakes.
The fact that automated trading algorithms eliminate hasty decisions is one of their main advantages. Automated trading programs will place orders as soon as the predetermined criteria are satisfied.
Ensuring Backtesting Ability
The majority of automated systems let you assess the chance of your rules and tactics succeeding by comparing them to past data. This enables you to fine-tune a strategy and resolve any problems before risking actual money.
Ensuring Speed, Diversity, and Effective Time Management
Given the speed at which these bots can work, they are able to adjust to market circumstances and generate orders instantly if trading parameters are satisfied. Plus, you can define a number of strategies while saving on monitoring time and letting your bot do it for you.