The advent of computers in general meant things would be moving toward automation more and more. Well, Algorithmic Trading Robots is no exception. The process of trading in this market, and by extension other markets as well, can be automated in the form of an algorithm.
Although it goes by many names, including trading bot or robot, its technical term is algorithmic or automated trading. And as it turns out, the foreign exchange market is one of the most ideal targets for this form of trading.
In this article we are going to zoom in on this concept a bit further and see how algorithmic trading works and what are its advantage sand disadvantages.
Algorithmic Trading Robots: Understanding the Basics
At the heart of algorithmic trading lies exactly what you think it would – i.e. an algorithm.
And of course an algorithm is a process by which an action is carried out. The action in this case being the execution of a trade. There are precise and clear steps defined for the algorithm that ought to be passed for the trade to be executed.
Similar to any other algorithm, there are many loops and hurdles to go through in order to get to the end of the algorithm. This means when, for example, you are using an algorithm that has been designed to trade in the forex market, it wouldn’t just go about trading on its own.
It would follow the steps that have been already defined for it. In other words, the algorithm. The basic foundation of the algorithm is almost always defined by the developer. But there are also other inputs and initial settings that can be set by the traders themselves.
Then when the trading bot, or the algorithm, is activated it will go through the algorithm step by step which is defined when to sell or when to buy, what the stop loss should be, when to enter, when to exit, etc.
Then according to the process defined in the algorithm, the trading bot will execute trades in the market.
You should read: Passing the Challenge of Prop Trading with XauBot
What Are Forex Robots?
Forex robots are just the cooler name that traders have given the algorithms that are developed specially for trading in the foreign exchange market.
And if you think about it, it is kind of like getting a robot to execute trades on your behalf. In any case, a forex robot is a piece of code or algorithm that is developed in order to be able to carry out trades in the market.
Forex trading robots will mostly make the process of technical analysis easy. As you know, technical analysis is the process through which you can pick up on patterns that exist in the market.
These price patterns are detected or analyzed based on the moves that the market has already made. You take the data that is already available and analyze it in order to find patterns that might repeat themselves in the future.
When you factor in the sheer volume of information that is needed to do this task, you can see how it would be quite difficult for any individual trader. This is why we rely on technical indicators, which are basically formulas that help us do the calculations for technical analysis.
But who has the time for math, right?
The good news is that algorithmic trading is precisely designed to take over this process. It will do the analysis on your behalf based on the initial input that it has received from you or the original developer.
You should read: What Is Prop Trading and How Does It Work 2024?
How Can You Get a Algorithmic Trading Robot?
Now that you have a clear understanding of important concepts such as algorithms, algorithmic trading, automated trading, and forex robots, let’s see how you can acquire them.
The development of a forex trading robot can be a complex process. This is the nature of any similarly complex algorithm. Many different scenarios should be defined in the branches of the algorithm for it to work effectively.
So unless you are a skilled programmer, it is unlikely that you can develop your own forex robot!
There are individuals and services that professionally design and develop these algorithms to suit the needs of different traders.
As a result, there are algorithmic trading bots that are designed for arbitrage in different financial markets, or bots that are designed for scalping in the forex market, etc.
As long as we are discussing the acquisition of a forex robot, we would be remiss not to mention XAUBOT Pro, a forex trading robot designed to trade all forex trading pairs and be able to trade up to 5 different pairs at the same time.
This forex robot has been developed to guarantee yielding ideal results in terms of win rate and also drawdown, thus being able to bring its users steady monthly profits.
But aside from specific examples, what are the general pros and cons of these algorithms?
Advantages of Algorithmic Trading in Forex
The following items can be considered among the advantages of algorithm trading in forex.
No time delays between opportunity and action: when the individual trader picks up on an opportune moment in the market, there might be quite a bit of time between then and making the actual trade finalized. By which time the moment might have passed. But with a trading robot, you can rest assured that there is a time delay between detection of the opportunity and the execution of the trade.
The elimination of the human factor also means that there are no human errors or otherwise erroneous judgements that are made in the light of human emotions.
Disadvantages of Algorithmic Trading Robots
There are certain disadvantages that can be associated with algorithmic trading in the forex market. Things that are a bit easy to guess such as the dependence on constant access to the internet and possible computer crashes that all can hinder the process of trading. Though they can do the same to a human trade all the same.
One of the biggest cons that is purported by many to be associated with algorithmic trading is the lack of human innovation or in other words interference with the trading process. In other words, the algorithm is set and you have to follow it if you choose to do so.
You should read: Maximizing Profits with Automated Forex Trading Robots
Algorithmic trading is the implementation of an algorithm or software in order to automate the process of trading in the forex market. This is why this form of trading is sometimes also referred to as using a forex trading robot. Algorithmic trading in the forex market has certain key advantages. You can see almost all the advantages associated with algorithmic trading in the forex trading robot XAUBOT Pro.