As machine learning gets more and more advanced by the day, the concept of automated trading becomes a reality. The life of a trader is tough and requires long hours of screen time that can be detrimental to your health.
Most traders also pursue day time jobs, and it is merely frustrating for them to be present in two places at once. For this reason, many traders have started looking at the potential of trading bots and the possibility of teaching them a set of defined rules that they can act on and trade on the owner’s behalf.
What Is A Trading Bot?
A trading bot is best defined as a computer software that operates by interacting with the market and works towards automating the data it receives from an exchange. The bot uses data from the market and uses market data in its algorithms, which help it decide whether or not it would place a buy or sell order.
There are a lot of different bots circulating in the market; however, not all of them are good. Some bots are fake or are not able to adapt to the market conditions; therefore, it is essential to be wary and conduct your due diligence and make sure that you purchase a bot that fits your requirements criteria.
Every bot version has its own set of strategies and technical indicators that can help it decide how trades are made, and it can also help them make buy-sell decisions on their own. Trading bots that are AI integrated can be taught trading strategies that can give your bot insights and be able to carry out accurate trades on your behalf.
How Do You Use It?
One of the most apparent benefits of trading bots is that they can focus on multiple things and multiple transactions all at once. Something which humans can’t do, and therefore bots are more equipped in being able to identify potential business opportunities and being able to use them for their benefit.
Trading bots are used by clients that do not have the time to follow charts all day and conduct their analysis each day. These kinds of clients need an automated system that can help maximize their potential profit by making a multitude of transactions all at once.
These bots can execute thousands of transactions in a matter of seconds and can help give you a competitive edge over the market.
What Are The Benefits Of Trading Bots?
There are many benefits to trading bots. Trading bots can help you predict the market effectively, but that alone is not enough. There are many trading bot benefits that we can avail, some of which are:
1. Bots have a variety of trading tools and strategies
Trading bots that are only able to predict market price fluctuations are not enough. For most of us, trading bots that have the capability of being able to use various trading tools and be able to execute different trading strategies at the same time are ideal.
Different trading tools can help you get more accurate results each time. They can also help you in drawing accurate predictions and will also be able to help you make quick decisions and gain the first-mover advantage in many cases.
There are many different bots available in the market that have many various trading tools integrated with them. To be able to select the perfect bot that fits into your requirements, you will need to research thoroughly and also shortlist the best options that you have.
2. With trading bots, you can trade at record speed and trade nonstop
We, as humans, are prone to get tired and also are unable to focus on multiple things all at once. Robots can carry out trading nonstop as long as they have a suitable power source.
Trading bots can carry out continuous trading for 24 hours, keep an eye on multiple stocks, and can even set the entry and exit prices by itself without any intervention.
With trading bots, your trading will never stop, and you can end up holding a lot of successful trades in a day. You don’t even have to supervise the trades much if you’ve invested in a good bot, which means that you can devote your efforts to creating value elsewhere or simply relax and let the robot earn for you.
3. Easy to use
Trading bots are incredibly easy to use, as well. You will need at max two weeks to be able to learn how to operate and teach the trading bot to execute actions. You can also get the bot set up by a professional and take tutorial lessons that are often readily available online or are provided to you at the time of purchase.
The cryptocurrency bots are easier to use and have a graphical interface that is easy to use and can also be operated by beginners with ease. Advanced traders can also use the cryptocurrency trading bots to fine-tune their strategy and make changes to the original settings.
4. Trading bots have no emotions
For traders, it can get hard to make sound decisions. We, as humans, are highly emotional, and emotions can quite often cloud our judgment. It can be greed, stubbornness, or even panic that could prevent you from following through with your initial strategy and making the right decisions.
By defying your initial strategy, you are ignoring the research you have made on your stocks. Having a strong emotional reaction is normal, but it can quite often land you in losses and rarely end up in giving a profit. The good thing about trading bots is that they are not emotional and treat wins and losses as the same. Trading bots can execute decisions when the point comes and save you from making emotional losses.
There are different types of trading bots suited to different kinds of trading activities that I am going to talk about. I am going to be covering the things you should be looking for while choosing a bot for trading in Forex, cryptocurrencies, and stocks.
What Should A Cryptocurrency Trading Bot Have?
Commonly bots built on buy and sell strategies are common in both cryptocurrency and also traditional markets. These include trend trading bots, arbitrage bots, market-making bots, and coin lending bots.
The cryptocurrency world has been taken over by bots, and if you’re a trader in the cryptocurrency world, you will quite often notice that there always seems to be a higher limit order placed instantly after you place your order.
It doesn’t mean that there is someone behind the screen waiting for you to post an offer. It merely means that your actions are triggering a bot, and it can prove to be particularly hard to outwit them. Therefore, if you can’t beat them, then it is best to join them.
The cryptocurrency market is volatile, and consequently, you will need to get a bot that is reliable and can work quickly. Before making a bot purchase it is best to carry out your own analysis and review the market to see how the particular bot is performing.
Another critical thing you need to look out for is whether your bot is secure. Checking if your bot is reliable or not is essential because you will be giving the bot access to your funds, and you need to make sure that the bot is not easily hackable.
Cryptohopper is one such bot you can use. The bot is moderately priced and has received glowing reviews despite being new in the market. Another added benefit of this bot is that it uses cloud technology and won’t only work when your PC is running. The bot can even place orders overnight, which means that you can sleep in peace, knowing that there is hardly going to be an opportunity that you will miss.
Make sure that whatever bot you end up choosing has features like trailing stops, technical analysis templates, and even features like backtesting. Templates will help guide you on setting up your bot and are generally useful to have.
What Should A Forex Bot Have?
Forex bots are a computer program or algorithm that scans the entire market, looking for profitable exchanges. Choosing a reliable and secure bot is just as relevant here, and there are a few other features that you should keep an eye out for.
You should consider forex robots that have a backtesting feature and the robots that have been backtested on various currency pairs and in different market conditions.
You also need to check the drawdown on each robot that you end up purchasing. Drawdowns are a personal preference, and every trader prefers having a different drawdown; therefore, it is better to invest in a robot that has a drawdown close to the one you want.
The forex bot should also have a real live trading result. There is a big difference between simulated market conditions and actual market conditions. Simulated trading doesn’t take into account many factors and, most importantly, doesn’t take liquidity into its elements. Therefore you should always check a robot live trading results and check the reviews online.
What Should A Stock Trading Bot Have?
The stock trading world is enormous and it is changing rapidly with the introduction of trading bots. If you have the budget for it, then you should invest in AI trading methods that can help you make faster and more emotionless decisions.
You will need a bot that can carry out random analysis of articles from all around the world and can keep you updated with the release of different financial statements from different companies and various corporations all around the world.
A bot that is integrated with AI will also be able to give you entry and exit point suggestions. The stock trading market is vast and as a result, there is a wide range of bot features that are provided. The latest bots also come packed with risk mitigation strategies.
For any trading market, timing is critical, and therefore, you will need a bot that can work quickly and can also analyze millions of data points simultaneously and keep you posted with fillings and stock quotes. A bot that can filter out noisy data and clutter can also help you save time and make the most out of your investments.
These strategies can help you get the most out of each trade you make; you can get automated order management and near-continuous order matching as some of the benefits. You can also look for bots that come with trading alerts that can help you know about excellent trading opportunities and can help you in taking advantage of the situation.
No matter what bot you choose, you need to make sure to select a bot that is compliant with different law enforcement organizations so that you do not find yourself stuck in a legal case.
You can also create a bot of your own and design your custom algorithms that work according to your needs and requirements. There are many ways through which you can create your trading bot. You can buy software that can assist you, or if you are technologically savvy, then you can start building a bot of your own from scratch.
If you’re an experienced trader that already has a working strategy, then you can invest in a system that helps you create your bot that can have all the features that you desire to be present. You can even invest in an AI system and teach your robot your trading strategies over time.
Robots are rapidly taking over, and therefore it is best if you jump in the bandwagon too before it is too late. Entering the trading market and making enough to purchase a trading bot is still doable, and the situation might not be the same a couple of years from now. Therefore, it is best to take advantage of the opportunity while you still have the chance.