Personal expert

Acquaintance with a trading robot

A trading robot/expert/adviser is a program that allows traders to perform some trading actions and make their work much simpler.  The algorithm used for taking decisions is a trading strategy embedded in the code by skilful programmers. However, traders can create their own robots independently. A forex trader using MT4 or MT5 platforms can build a trading system to be followed by a robot within the MQL section of the terminal. Besides, the terminal can offer ready-to-use advisers which traders still can tailor to their needs by simply modifying the code. Trading experts may also be downloaded and installed to the terminal.

Are trading robots really that useful?   

Trading robots do simplify traders' work. Firstly, they save their time. Secondly, traders can delegate routine actions to robots under familiar market conditions and thus free themselves for more important tasks. Thirdly, robots are unemotional, so nothing will happen by chance.   Nevertheless, there are some cons too. As a rule, when new traders get to know about these "magic" programs, they are easily carried away by the dreams about easy money and zero responsibility. They don't feel the need to study the market as they have a clever robot. That's what they think. We know that it's far from being real. But a novice feels anxious and gets mousetrapped easily. Why can't that be real? Just because a robot does not possess a human intellect and can't adapt to unsteady market conditions. It just follows the algorithm. All a trader can do is choose the right adviser, assess its relevance to the situation, modify it when necessary and benefit from what a program has to offer.  We don't demand of calculators to do the shopping, do we? 

Varieties of robots   

The official categorization of trading robots does not exist. But traders agreed to single out 5 groups of robots for more convenience according to 5 respective criteria: 

1. independence;

2. availability of technical indicators;

3. strategy used;

4. position keeping time;

5. number of trading tools.

Don't be scared! The categories are used rather for better understanding and not for practical reasons. You rarely see a specific type of a trading robot in real trading as trading systems normally combine a few features.

Criterion: independence

The first group includes 2 types of robot: automatic and semiautomatic. The first ones are fully independent programs that only need to be launched with the time of work indicated. The rest is the robot's responsibility (like it or not). Semiautomatic experts don't make independent decisions but point to a better decision. A trader thus receives information on most favourable market entry and exit points from the robot. These are a trader's assistants, not substitutes.

Criterion: availability of technical indicators;

Depending on the availability of technical indicators, trading robots are subdivided into indicator and non-indicator ones.  Indicator advisers employ various kinds of technical analysis indicators, which produce signals to initiate an action. Non-indicator advisers rather use various graphic patterns to produce a signal.    

Criterion: strategy used;

According to the strategy used, trading robots are subdivided into 8 categories. We are going to examine each of them in detail.

Scalping advisers are developed for trading in the Forex market within a time constrained environment. The scalping strategy may imply 2-second trades, that's why the speed of reaction is extremely important. Robots are here to help traders out. They are able to open and close trades on different instruments at the same time, what a human is just physically unable to do.

Trend robots react to market forming trends and build strategies accordingly (we are speaking about trend trading strategies here).

There also exist grid robots. They stand out as being applied under high risk conditions and operating mostly on large budget accounts. The importance of grid robots' strategy lies in the principle of averaging: a robot builds a few lines for opening differently directed orders.

Neural network robots are a real innovation. These robots have a sense of time and are able to learn. Assessing the behaviour of a trading instrument over past periods, the robot forecasts future fluctuations. 

The robots that use the Martingale principle may seem strange. They are based on the game strategy: the robot doubles the lot if the trade is not profitable. High risks and big deposits are part and parcel of these trading systems.

Arbitrage robots can assess other brokers’ conditions, which allows them to assess a "speedy" broker's market and take a relevant action using a pre-emptive tactic. 

News robots are focused on important market news. They open differently directed pending orders beforehand, and automatically close the order whose direction is different from the market movement, fixing profits on the other order at the same time.

Criterion: position keeping time;

All's clear here: we can deal with intraday, middle-term and long-term robots, depending on the duration of our trade. 

Criterion: number of trading tools.

Trading robots can focus on a specific trading tool, and then they are called "single currency advisors". If they deal with a few trading instruments, they are called "multicurrency advisors".

Which robot to choose?

You choice will be fully dependent on your market tasks. Assess your trading system and choose an advisor that would suit you best. Examining today's options, you'll find out that the robots inclined to the highest risks and deposits promise most of profitability. Also, pay attention to the opportunity of examining a robot to avoid surprises. Commercial robots are accompanied with detailed instructions, which is very important. Remember to test a robot on a demo account to protect yourself and your account against unpleasant occurrences.

Thanks for your attention! Good trades everyone!

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Written by:

Эмма Сарибекян

Экономический обозреватель