Trading Bots: What Are The Benefits? How Reliable Are They?

Bots revolutionize the Stock Trading world

Stock trading is a business that entails many emotions and psychological elements. It is a trade that is gainful to the most insightful and driven professionals. But I am here to tell you that Stock Trading Bots have really altered our outlook on the trading industry.

A computer program that makes a trade on your behalf. Traders now have the power to automate their moves through computers and remove all the emotions out in the process. Bots use computer algorithms to monitor markets for viable conditions. A Bot developer sets initial guidelines, entry, and exit points for potential positions and pre-established parameters.

There are several kinds of Bots that favor diverse market conditions and trader needs. One such example is scalping, it is a strategy for making consistent but smaller profits in a sideways market. It is designed to trade in order to shave those profits out of the market automatically. Scalping Bots only serve the sideways market; they may not trade so well in bullish or bearish conditions. Thus it is advisable to figure out which strategy Bots to use under different conditions.

A trader has the option of either building their own Bot or invest in a pre-programmed Bot.

Creating Bots

You can create a Bot to read certain signals and pre-determine the trade action it will take as a response. Once it is ready the next step is to backtest to make sure it fares well in the real world with real money. To build a Bot you will require trading experience along with technical programming know-how. Or you can simply build a Bot with intuitive graphical user interfaces.

Preprogrammed Bots

If building a Bot from scratch is not your thing, you can simply use a Bot built by someone else. They can be purchased from creators or certain platforms that deal in pre-programmed Bots. In most cases, you will find partly pre-programmed Bots which means that you will have to customize them before you can actually start to trade with them. With your trading experience, you will be able to decide which kind of strategy is best and also choose different signals.

Are trading Bots any good, you ask? It really depends on how well they are programmed and the suitability of their programming in the current market.

Let’s look at Bot advantages over manual trading:

Trading round the clock — While your local stock exchange may have regular trading hours, the world markets are open 24/7. This is where Bots play a key role as they never have to eventually rest like humans. Cloud-based Bots keep working even when the computers are off.

Quick execution — Unlike humans trading, Bots can automatically detect opportunities and act on them.

Emotions Out — Effective trading requires a plan and sticking to it and not running with gut feelings at the moment. Trading Bots totally remove the emotion quotient out of the equation and only run based on the data.

Reduced Error Rate — When entering data manually, there is always a chance of error but with Bots, this risk is greatly reduced.

Backtesting — Have a new idea but not entirely sure it will work? Backtesting allows you to test your strategy to see how it can work. Then there is also the option of paper trade.

It is important to note that trading through Bots does not relieve you of risks. There is no such thing as automated profits. The risks are real even with the Bots.

Scams — They are an ongoing issue in the trading Bot space. It is paramount that you research a Bot well and protect your funds from scammers. Any Bot that promises of guaranteed returns should be alarming.

Set & Forget — Do not think that once you set up the Bot it is going to make you money while you awake and sleep. They are not passive income generators, they constantly need to be monitored and adjusted as per market conditions.

Bot investment — It is eminent to check the quality of software before you buy it because a poorly coded Bot could potentially lose your money.

Other elements like not giving your Bot withdrawal access, following 2-factor authentication, safeguarding your API secret, and tracking your trades will also assist you in limiting your investment risks.

Software consulting company that focuses on emerging technology such as AI, Blockchain, Cloud Computing, and Data Engineering, MERN Stack, and Fintech

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