A trading robot is an automated trading system that can buy and sell financial instruments automatically on behalf of the user. They usually contain complex algorithms that analyse charts for trading signals. When the trading strategy programmed within the robot finds a valid signal, it can place, manage and eventually exit a trade position. This makes trading robots a hands-free solution for users of all experience levels. You do not need hours every day or years of studying to run a trading robot which is one of the reasons they have become so popular amongst retail traders and institutional investors alike.
How to Use a Trading Robot?
There are trading robots which work in many different ways. You can find robots that have been developed to run in specific platforms such as expert advisors for the MetaTrader platforms. Then you have robo-advisor services and social trading where you can copy trading signals.
If you are considering using a trading robot, these are the steps that you may want to consider:
- Decide what type of trading robot you want
- Consider what markets you would like to trade
- Research available robots
- Choose a trading robot
- Run the bot on a demo account
- Review performance
- Consider switching to a real account
- Track trading results
One of the easiest ways to get started with a trading robot is through the MetaTrader 4 or MetaTrader 5 platforms which you can download from the majority of online trading brokers completely free of charge, including IC Markets who have some of the best trading conditions for automated trading systems.
When you have downloaded the MT4 or MT5 platform, you can choose from thousands of trading robots in the marketplace which is accessible directly on the platform. MetaTrader robots are known as “expert advisors” or EAs for short. Developers can create robots and share them with the MetaTrader community.
There is a great selection of EAs in the MetaTrader platforms using a wide range of trading strategies for all different trading strategies. You will find scalping robots, grid robots, day trading robots, swing trading robots, martingale robots and much more.
Commercial Trading Robots
These are the robots that you can buy from an independent developer who will more often than not be selling a trading robot that they have built and tested via their own website. Prices can range from as low as $50 but go into the thousands depending on the vendor. There are thousands of commercial robots available but many of them do not live up to expectations. This can be because they are using over-optimised trading strategies and/or dangerous money management. Anyone can create a robot than will look good on historical data but developing something that is good takes years of dedication.
Trading Robot Results
When searching for a trading robot, there should be verified results provided that show how a robot has been performing recently which can help you decide what the best trading robots for your individual needs are.
The MetaTrader platform has a built-in strategy tester where you can backtest robots on historical data to see how they may have performed historically throughout various market conditions. Along with verified results on a real account which are perhaps the most important thing to look out for, backtest results are also an important factor to consider.
Although historical results can give you an idea of how a robot has traded in the past, they must not be seen as an indication of future results. This is trading and anything can happen so never trade with more than you can afford to lose.
Choosing a Trading Robot
There are many things that you need to consider when choosing a trading robot that is suited towards your needs. Every trader is different so here are some things that you might want to keep in mind during your search:
- Financial Instruments
- Chart Timeframes
- Investing Platforms
- Trading Strategy
- Money Management
- Robot Results
- Historical Backtests
- Customer Support
- Robot Cost
- Refund Policy
A robo-advisor is an automated platform that manages investments for you. Robo-advisors provide financial planning services through automated algorithms with no human intervention. A robo-advisor can be defined as “a self-guided online wealth management service that provides automated investment advice at low costs and low account minimums, employing portfolio management algorithms”.
A robo-advisor works by first gathering information on a client through an online survey and then automatically investing for the client based on that data. Robo-advisors often use passive index investing strategies. Some robo-advisors do have an element of human interference and supervision.
Robo-advisors invest your money in a diversified mix of ETFs. Since ETFs themselves are diversified collections of hundreds of stocks or bonds, your robo-advisor can provide exposure to thousands of different sectors, industries and companies. Robots can build portfolios based on questionnaires that gauge your financial situation, investment experience and risk tolerance level.
Most robo-advisor portfolios are built with an investment strategy called Modern Portfolio Theory. Modern portfolio theory, or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk.
Robo advisors can be a possible choice for beginner investors or those who do not want to deal with the hassle of choosing individual stocks, shares, and other investments. That being said, there are no guarantees on how well they will perform and they can still carry the same risk as using your own trading robot on a trading platform does. Always seek professional advice and never risk more than you can afford to lose.
Social Trading Signals
Trading Signals allow you to automatically copy the deals performed by other traders in real time. Many successful traders provide their trades in public access either for free or for a reasonable fee, becoming signal providers.
Examples of social trading signals include the following:
MetaTrader Social Trading
The showcase of 3,200+ free and commercial signals can be found on the signals tab of the MetaTrader platforms. For your convenience, all signal providers are sorted by their trading results. The most successful ones are displayed at the top of the list. You can select your signal provider, subscribe to their signal and start copying their deals both on demo and real accounts without leaving MetaTrader 4 or MetaTrader 5. The signal does all the work for you according to the parameters of trading you will set. If you are a successful trader and want to earn extra income, you can also become a signal provider and share your trading strategy with millions of other traders to earn fees from your subscribers.
eToro is the world’s leading social trading network. Powered by millions of users from over 140 countries, eToro has been able to refine their knowledge and experience into practical trading tools. Alongside being a popular broker for stock trading, online investing, crypto trading and much more, it has also introduced many novel social trading features. There is an array of social features eToro offers that are vast and extend well beyond the trading platform itself. While pioneering social features and making the financial market more friendly and accessible to almost anyone around the world, eToro has also extended its reach and is maintaining active social channels.
Discovering other traders to copy on eToro is quite easy. On the Copy People screen, there are several methods to locate people that may match your trading and investing needs. The Editor’s Choice section presents Popular Investors (more about the program below) that have recently been trading that are worth checking out.
Also, it is quite simple to locate traders by using the search tool and filtering the results. There is a variety of parameters to choose from, such as gain, Risk Score, location and many others. Since eToro operates in complete transparency, each trader that can be copied has valuable information on their eToro profiles that will help you determine your ideal choices for creating your people-based portfolio.
AvaSocial is all about social trading within the AvaTrade community. The social trading app shortens the learning curve. This brings copy trading into focus, where you can discover mentors, ask questions, and copy trades. By learning from the best, you mimic their performance in your own portfolio. Plus, there are real-time trading signals, updates and social sharing of important trade-related data. AvaSocial traders can also share their successes, frustrations, and ideas with a community of like-minded traders. Other benefits include access to scores of markets, across a wide range of financial instruments such as currency pairs, cryptocurrencies, commodities, indices, and stocks.
AVA Social lets you execute trades, copy experts and message other investors all on one platform. Chat, trade, copy, earn, all on the go. You can connect to the traders that matter the most to you.
- Execute trades from hundreds of global markets 24hrs a day
- Follow and copy trades from other users
- Auto-copy expert traders
- Talk to other traders and learn from the best
- See trader performance
- Create your own chat groups
- Follow traders and receive their trade updates
- Join Mentor groups, learn and follow their signals
Custom Trading Robots
For those of you who have some programming experience, you could even consider building your very own customised trading robot. Perhaps there is a manual trading strategy that you already use successfully which you want to automate. You can build robots in various trading platforms or use a third-party development software with a more user-friendly interface.
Custom MT4 EA
The MetaTrader 4 platform has a built-in programming interface where you can develop robots in the MQL4 language. The MetaQuotes Language 4 (MQL4) is an object-oriented high-level programming language intended for writing automated trading strategies, custom technical indicators for the analysis of various financial markets. It allows not only to write a variety of expert systems, designed to operate in real time, but also create their own graphical tools to help you make trade decisions. MQL4 is based on the concept of the popular programming language C++.
Custom Software Robot
If you are lacking in the programming department then you could consider building your own trading robot by using a third-party tool such as the InstantEA. The InstantEA is a powerful trading tool that enables you to turn your MetaTrader 4 and MetaTrader 5 indicators into automated systems with full back testing capability, live trading, and dynamic settings customization. There are plenty of other tools which you can use to create your own unique automated trading strategies without any coding skills.
There are various different options when it comes to automated trading and investing. You can choose from commercial robots that are ready to go, robo-advisory services, social signals and even develop your own automated trading systems. Whatever you route you choose to go, make sure that you do plenty of research and read as many robot reviews as possible. If you are looking for some inspiration, take a look at our robot ratings. You can also download our free trading robot to familiarise yourself with how automated trading works.