Trading Robots as a Source of Passive Income

Wednesday, 18 August 2021 10:00

Trading Robots as a Source of Passive Income

Guest Opinion: Trading robots are automated algorithms that trade the markets or provide signals on auto mode. Depending on their code, they can scalp, day, and swing trade. Tons of expert advisors are being introduced daily in the markets; however, only a few can trade consistently. These EA are primarily built to run on specific currency pairs and certain hours. Traders must meet all the requirements of the automated software to get the best possible results. Our article will discuss all the important features of these robots and discuss how you can choose the best one for your needs.

Characteristics of Robots

There are certain characteristics of these automated algorithms that must be considered before implementing them on the charts.

Brokers

Brokers can offer different types of accounts to traders, which can differ based on the latency and fees. Some robots are better suited to work on ECN brokers that offer fast executions and little to no spreads. In contrast, others may work on both ECN and standard accounts.

Strategy

The trading strategy of the robot is built into its code. The expert advisor is programmed to follow it without any psychological barriers. Depending on the game plan, the algorithm might trade frequently or barely place any trade. Some robots come with multiple indicators that must be attached to the charts. Traders automate their strategy by building indicators and then use expert advisors to take signals from them.

Nowadays, grid and martingale robots are popular in the financial industry amongst retail traders. While these algorithms provide a smooth balance curve, there may be sharp drops in equity that may result in margin calls.

Risk management

Risk management is one of the key components of an expert advisor. Trading using a proper stop loss and taking profit adds to the credibility of the algorithm. Robots may have a built-in equity stop to protect the account from high drawdowns.

Verified Records

Verified trading records that are tracked through noted websites are a key way to determine the efficiency of a trading robot. Developers who fail to provide performance statistics usually have an underperforming algorithm that they are willing to sell to newbies. The price of these robots can go up to $10000.

Demo and Backtesting

After purchasing any algorithm, it is vital to test it on a demo account before placing it on a real portfolio. Backtesting is also one of the useful features that most trading platforms offer. It allows us to test the performance of the algorithm under various stressful market conditions.

Automation

As mentioned before, some robots are fully automated, i.e., they require no manual intervention and run without the support of a trader. Indicators are also algorithms, but they are only built to provide signals where market participants will have to implement the trades manually.

A Few Benefits of Robot Trading

Robot trading has numerous advantages for traders. Some of them are listed as follows:

• Psychology. Robots are not influenced by normal human emotions such as greed, fear, etc. that can significantly impact trading. Therefore they can trade with complete consistency and follow the game plan strictly
• Manual intervention. As most of the algorithms do not require manual intervention, traders can rest while the expert advisor does all the heavy lifting
• Mathematics. Trading robots can solve hundreds of complex mathematical problems regarding the market and price action, which is impossible to achieve manually. By doing so, they are able to predict and trade with better efficiency
• Experience. Anyone with little to zero understanding of trading can use a trading robot. It is pretty easy to set one up on the trading platform.

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