Let’s be frank, it is the dream of absolutely every trader to be able to make profitable deals on financial markets all the time without putting any effort to do so, regardless of what market they trade in and what assets they choose.
This dream is absolutely unrealizable. After all, if all traders began to make profitable deals, trading on financial markets would simply stop. And yet, by all means, trading robots can be of great help to traders by automating trading and at least partially taking over a certain part of important operations, relieving traders of some additional stress.
However, you should not forget that regardless of whether you use trading robots or not, it is always very important to conclude transactions in a convenient and functional trading terminal. When choosing a trading terminal, choose a well-known platform such as mt4. And right now you can start an mt4 download free of charge and very quickly on the Exness broker website.
In this article, we’ll have a closer look at all the advantages and disadvantages of using trading robots. But first, let’s understand what these trading robots are and what types they are divided into.
What is a trading robot?
Trading robots are computer programs being programmed to implement a particular trading strategy, the conclusion of transactions at the occurrence of the necessary trading conditions, and perform other trading functions.
Trading robots are often called bots, or automated trading systems. By having sufficient trading experience and knowledge, the trader can create such a trading robot by himself. Beginner traders prefer to buy these robots from other traders or developers.
But it is important to understand that the trader assumes very high risks, because having paid for an allegedly very profitable trading bot, he may receive a “pacifier”, or a program that will drain his entire deposit. Truly profitable Expert Advisors cost a lot of money and are often unavailable to newbies. Before you buy a trading robot, you should definitely check whether you are using a reliable source, so as not to waste your money in vain.
Types of trading robots
All trading robots on the market can be divided into two types: fully automated and semi-automatic.
Features of fully automated robots
Fully automated trading robots carry out the analysis of the market and define the best possibilities for transactions according to the chosen set of rules. These trading robots establish trailing stops, generate stop orders and carry out other functions.
Advantages of such robots are:
- High speed. These robots are much faster than a human can analyze the market and find those opportunities for trades that traders often overlook
- Absence of the emotional component. The most important advantage of using such trading robots is the ability to enter into transactions without any of the doubts and worries that traders often have. They always accurately adhere to the plans.
- Time-saving. These trading robots do most of the tasks for the trader, allowing the latter to do other important things.
Such trading robots will be the best solution in situations where the trader has too little time for independent trading, or it is quite difficult for him to stick to his trading strategy. But do not assume that a fully automated trading robot will be the solution to all your problems. From time to time you will need to check its work, and, in case of some issues, make the necessary changes.
Semi-automatic Bots: Their Advantages and Disadvantages
Similar to a fully automated trading robot, a semi-automatic bot is able to analyze markets and find favorable trading opportunities based on pre-programmed rules. The difference is that it does not conclude trades for the trader, but provides him with all the important information, in particular trading signals with entry prices. Having received this data, the trader will have to decide for himself whether to open a deal or not.
The advantage of using such trading bots is a wide range of functions and the ability to free up time, but the robot will not trade for the trader, so the trader will have to make his own decision.
Semi-automatic trading robots are cheaper than fully automated systems. However, in both cases, you should weigh the pros and cons before making a decision and completely trust the creator of the robot.
Benefits of using trading robots
Having made the decision to use automated trading systems, the trader can expect to receive the following benefits:
- Trading 24 hours a day, 7 days a week. No matter how committed you are to your business, every human body requires rest. You’ll want to sleep or take time out for other important activities, like taking a walk in the park for a break from the charts and numbers. The trading robot will provide you with such an opportunity. It will constantly monitor the market and make transactions for you, according to predetermined rules, both during the day and at night.
- No deposit losses due to emotions. It is no secret how much emotions such as fear, greed, and hope can ruin your trading. However, trading robots will make deals no matter what. They will not doubt or think for a long time whether they should enter the market or not, they will simply act according to the rules.
- High speed and efficiency. Trading robots are much faster at finding favorable trade opportunities than any trader in the world. Very often it takes them only seconds.
- They help in testing trading strategies (for example, in beating the S&P 500 or crypto prediction software). If you need to test a trading strategy on historical data in order to optimize it, it can take you a very long time. Trading robots are able to store a huge amount of historical data and analyze it much faster.
- Ability to use more complicated strategies. Often it is very difficult for traders to check all the conditions of trading strategies by themselves, taking into account all the factors. Trading robots handle this task much faster and easier, and they are able to track multiple assets, implementing even the most complex trading strategies.
Disadvantages of using trading bots
It would be naive to believe that automated trading systems offer only advantages to traders. Alas, they are also not without some disadvantages, which include:
Dependence on a stable Internet connection. Any failures on the server can cause the trading robot to become incorrect and require intervention from the trader.
Lack of imagination and self-study. Trading bots just execute the algorithms, but as traders, they cannot use analytical thinking, creativity, and imagination to predict how the market situation can develop in the near future.
Inability to interpret fundamental data. Bots can analyze charts and are good at technical analysis, but they cannot analyze how political and economic events can affect the price of an asset.
And, of course, the biggest disadvantage is the high level of fraud. Today, many unscrupulous people try to sell inoperative trading bots, beautifully describing their effectiveness. If a trader buys such a robot, he or she is unlikely to get a refund.
How effective are trading bots?
To answer this question, you should first understand what exactly you expect from a trading robot. If you are expecting such a system to bring you an exceptional income under any market conditions, it means that every trading robot will be inefficient for you. If you want to free up your time and automate most of your work, then a trading robot will be of considerable benefit to you. Of course, if you buy it from a reliable creator and not from a scammer. It is best if you are given a free trial so that you can really evaluate its effectiveness and compliance with your expectations.
