Innovative technical analysis: Automated Trading, Trading Robots
Algorithmic (also called automated trading) is the conduct of purchase and sale operations in financial markets using specialized programs – trading robots.
The tasks of trading robots are to analyze prices according to specified algorithms, to make decisions and, as a result, to perform trading operations on the market.
Robot trading is widely used in the markets and its share relative to manual transactions is only growing. A computer program has many advantages:
- Does not get tired
- Stress-free
- Strictly follows the algorithm
- Reacts significantly faster to changes in the market
Robo-advisors
Among the programs for automated trading two broad categories can be distinguished: trading robots and indicators. The first ones are intended for performing trading operations in the markets, and the second ones – for analyzing quotes and identifying the change of patterns .
A trading robot or robo-advisor is a program capable of performing any actions at the request of an investor without his direct participation.
The disadvantages of robo-advisors include the following:
- Almost all high-quality profitable trading robots cost money. The cost of a trading robot on average ranges from $100 to $300.
- 99% of free advisors that can be found on the net deserve attention only as examples, samples for new ideas, but not full-fledged automated trading systems.
- It is believed that with all its advantages, an advisor will never completely replace a living human trader. Only a trader can see and take into account some of the details that are hidden from the bot machine. The bot will always trade according to a given pattern, emotional stress still remains, since transactions take place on money. There is no getting away from this, you can only change your attitude and treat this fact more calmly.
- You need a dedicated server VPS (VPS) for automated trading. It is quite cheap – $5-30 per month.
- The market changes over time, which implies the adaptation of the advisor trading algorithm. But not every robo-advisor can be optimized.
- Most of trading robots use Martingale, that means an increase in the rate (transaction volume) after a loss. This approach carries high risks of losing the deposit.
Creation of a trading robot
Trading robots are written in the MQL programming language. It allows you to program easily an investment system that will invest online. For programmers who are familiar with this language, such work will not be difficult. For ordinary users, this will be a more difficult task. Therefore, many decide to buy their own advisor.
All advisors are recognized as unique programs due to the applied neural network technology. Since the software collects and analyzes data, adapting to the external market environment, it can be mentioned that the program does not have a specific strategy, but acts like a living person. The robot is constantly studying the market and looking for matches with profitable entry points that have already worked well. In fact, the assistant adjusts the existing algorithm to the required patterns and acts according to the situation.
All advisors have one definite disadvantage. If their “stuffing” is not adjusted from time to time in accordance with the market, the information begins to slowly but surely become outdated. The result will be wrong decisions, unprofitable transactions and zeroing of the deposit balance. Therefore, it is useless to test the robot’s efficiency on old quotes.
There are a lot of trading robots on the Internet, but it is very difficult to find a profitable one, and if you apply lots of them, then there is a great risk of being left without money. That’s why it is better not to buy an advisor without researching it. Consider also the fact that many advisors can demonstrate excellent results when testing on one pair of currencies, but poorly on others. Therefore, it is better to use the advisor on the instruments on which it was tested.
Advisors are based on various technical analysis tools. The most popular and successful ones are based on the Martingale strategy, trading with moving averages, Bollinger bands, and a grid.
Martingale strategy in trading
The basis of the phenomenon is the principle of doubling the trade size every time a loss is faced. Literally the term means – “to play in an absurd manner.” Judging by the meaning, it is understood that the method is related to high-speed and high-profit trading strategies. Precisely because of this, it is used a lot by newcomers who come to the trade with small amount of money.
When the market turns against you, all that needs to be done is just wait. But to wait for a pleasant trend, you need to have not only patience, but also a sufficient amount of money. The deeper the loss is, the more it is necessary to open additional positions. It seems that the trader is trying to reverse the movement of the price , spends a lot of energy and money on it. Therefore, when the market is finally turning to his side, the trader has a regular volume of open positions, which will allow hi, to compensate for all the losses and he will win a lot. This is the Martingale method.
The most successful advisors based on this strategy are Forever Hacked Pro, Forever Warrior EA, Unimillion.
Moving Average Trading
A moving average is a technical indicator used to display the average value of an asset over a given period. It is an indicator based on past values such as high, low, open or close, or even trading volume. So trading strategies can be very diverse.
An example of advisors is Ultron.
Bollinger Bands Trading
Bollinger Bands are one of the most popular technical analysis tools used in the modern trading environment. Bollinger Bands are a chart with price channels that reflect a range of volatility. Within this range, the price of a stock can rise or fall.
When using Bollinger Bands, the lower and upper bands are often identified as price targets. In this case, you buy when the price reaches the lower band and exit when the price reaches the moving average in the center of the bands. Other traders prefer to sell when the price falls below the lower band, or buy when the price breaks above the upper band.
Milky Way, MILLION DOLLAR PIPS are examples of such advisors.
Grid trading
This method is very common among novice traders, as it does not require special knowledge regarding the foreign exchange market, and even such common things as technical or fundamental analysis. But a successful grid strategy means knowledge of the main trend at a selected time interval – up, down, or lateral price movement with a periodic return to the average value.
This method allows you to place orders at specified intervals in a specific price range. During grid trading, orders are placed above and below the set price, creating a grid of orders with gradually increasing and decreasing prices. As a result, a trading grid is created. For example, a trader can place buy orders every $1,000 below the bitcoin market price, and also place sell orders every $1,000 above its market price. This allows you to benefit from trading under various conditions.
Grid trading is ideal for use in volatile and sideways markets when prices fluctuate within a given range. This trading method allows you to make a profit with small price changes. The more frequent the grid, the more often trades will be made.
Examples of grid robo-advisors are Pionex, Bitsgap, KuCoin.
Thus, even if it is difficult for you to entrust your funds to a computer program, you can set up the advisor to generate sound alerts, which will greatly facilitate the work and allow you to spend less time on graphical analysis and waiting for signals to open or close positions.
Automatic trading is an example of new trends in trading. However, using only one tool in market analysis is unwise. Therefore, traders most often use different types of technical and fundamental analysis tools together. An example of the use of technical analysis and, on its basis, the introduction of artificial intelligence is MonInvAI, which predicts the values of stocks and cryptocurrencies for the future period.
