What is robot trading and how it works?

  • What is robot trading and how it works?

    Forex Trading Robot or also known as Expert Advisor is a software or algorithmic program that can be added to the forex trading platform to make trades automatically without human intervention.

    The use of trading robots has now been utilized by large institutions in conducting trades both in the financial market or crypto market and also in the stock market which allows the platform to carry out automated trading.

    In its development, trading robots can have multiple functions for automatic trading, adjusting position size, stop loss, money management, and so on. Even for copying transactions of other traders.

    What is robot forex trading?

    The development of internet technology has had a significant impact on the development of trading platforms in financial markets.

    Previously, forex traders made transactions by phone, with trading platforms such as MT4, MT5, Ninjatrader, cTrader, and other platforms it made it easy for traders to make transactions on the financial market.

    Of the several types of trading platforms, they already support automatic trading or what is known as expert advisors or trading robots.

    A trading robot is a software that is specially designed using a specific programming language to be able to trade automatically, semi-automatically, or only to provide trading signals depending on creators.

    Most trading robots are designed with certain trading methods such as using indicators as the basis for confirmation signals. If the software parameters are met it will automatically open a new order in the trading account.

    This can avoid mistakes due to psychological factors, where the robot works based on the logic embedded in robot programming.

    What Can a Forex Trading Robot (EA) Do?

    The functions of the Forex Trading Robot vary, depending on how the application settings are used by traders. Generally, EA can be programmed to do the following:

    • Open position (Buy, Sell) or Close position.

    • Change the Stop Loss and Profit Target of a trading position.

    • Analyze a pair of currency based on certain technical indicator parameters that can be set in certain rules.

    • Send alerts in the form of voice, email, API (integration to other applications).

    • Analyze the financial management of the account. Balance, margin, etc.

    With the ability to integrate into other applications, the potential for EA development is unlimited. However, Forex Trading Robots only carry out tasks (trading) following the programs in them Trading Robots always operate based on predefined system paths.

    So, a great EA is a translation result of a proven and reliable trading system. The more powerful the programmer applies to the language of the robot, the more results that get closer to reality will be obtained.

    Is robot trading profitable?

    If you are a trading expert, have a specific strategy that is proven to provide consistent profit for several years. To be able to help make automatic trading you can ask for help from an expert trading robot maker to create a robot that matches the parameters you provide.

    The performance of a trading robot is very dependent on a variety of factors to say whether the trading robot is profitable.

    Some robots are created with complex systems and by implementing good money management, they can become profitable robots.

    However, there are not a few robots that perform poorly and cause huge losses in trading.

    So on the question of whether the trading robot is profitable, the answer is relative, depending on the method applied, the money management that is pinned, and the amount of capital usually affects the performance of the trading robot.

    Do trading robots work?

    Trading robots can work well if they are designed perfectly without any coding errors in them.

    If the robot design contains some coding errors, this can cause the robot to fail to work. Since the trading robot uses complex machine language, one small mistake can cause the robot to stop working.

    Some trading robots are designed to be sold on the market, usually, the robot provider provides coding for the expired date of using the robot.

    When the expiration period has arrived, the robot needs to be renewed again by getting a license from the seller, this may require funds, some are free after one purchase.

    Usually, a trading robot that has expired, there will be a notification on the platform that ea has expired and there is an email contact to contact if the trader wants to extend the expiration date.

    How to get a trading robot

    There are several ways to get a trading robot, from paid or free.

    If you want to get a paid trading robot, there are advertisements on automatic trading software that promise lucrative profits on the internet.

    If you are an MT4 or MT5 platform user, you can browse trading robots on the market MQL5.com. This is a kind of market for forex traders from experts to retail investors.

    There you can find a wide variety of indicator software and expert advisors. If you are lucky some provide software for free.

    But if you want to get trading robots or expert advisors for free, you can try joining the trader community that talks about trading robots. Like in Soehoe.

    In the forum there may be good traders who want to share EA for free.

    How to use trading robots

    Using a trading robot especially on the MT4 or Mt5 platform is very easy to attach.

    All you need to do is copy your trading robot file and paste it in your MQL4 folder in the Expert folder.

    To open your MQL4 data folder, run the platform, and click the File menu and select the Open data folder.

    You need to set whether your robot is allowed to trade automatically or will only give alerts as trading signals.

    But nowadays trading robot enthusiasts have hired a VPS to run the robot 24 am 5 days a week in the forex market.

    The advantage of using a VPS is that the trading robot can run a full day, you don't have to turn on your personal computer for 24 hours straight.

    How to create Robot trading (EA)?

    Differences in trading platform developers cause different programming languages ​​to create trading robots.

    How to make a trading robot, you must know the programming language used. It has a variety of coding that the machine language will translate to perform its function. However, there is also software specifically designed to create ea.

    Some of the programming languages ​​for making popular trading robots include:

    • MQL4 programming language for the MT4 platform.

    • MQL5 programming language for the MT5 platform.

    • C #  language program for the cTrader platform.

    MQL and C # have a typical programming structure. So, if you already have experience in computer programming, it will certainly be easy to master it.

    Must We create Our Own Forex Trading Robot (EA)?

    No, now there are so many EAs that are commercialized and can be searched easily via Google. Of course, not all forex EAs are reliable.

    If a trading robot is reliable, why for sale? Only used by the manufacturer can be a money factory. However, many EA makers also want to get additional income by selling their robots.

    What Should Be Considered If  Buying Forex Trading Robots (EA)?

    Forex traders don't want to use a robot with bad results in a real account, this is quite risky, but to reduce the risk of getting a trading robot with poor performance, you should take the following steps to pay attention.

    Does the Forex EA use a good trading pattern?

    Check the robot is an example, there is a Stop Loss, a Take Profit, using a Trailing Stop, and others.

    Does this EA Forex use Money Management properly?

    Check for How much lot size does each trade open? How much money is at stake if lost?

    How good and complete is the EA usage guide? 

    Trading systems usually have distinctive rules. So, before using the robot, traders should know about the time zone used, minimum funds, the timeframe was chosen, the percentage of funds, and other parameters in the EA.

    Has this Forex EA been tested?

    Check about backtesting, either backtest with past historical data or test forward test with a demo account?

    Make sure the ea is through testing, and see the duration of the trial, the longer the period the better for the assessment.    

    Forward tests are certainly better than backtesting. 

    Consider only buying EA Forex that has been forwarded for more than 1 year.

    Check strategy and style of robot trading

    Check whether ea uses a style like scalping or martingale which includes aggressive and high risk trading systems.

    Also check the amount of capital, internet speed, servers, etc. that might affect the performance of EA Forex.    

    Check in forum community and read review

    Who knows other users provide testimonials or experience in using the trading robot.

    What Types of Robot trading (EA)?

    In general, Forex Trading Robot (EA) can be categorized into three, namely:

    Homemade Forex EA

    As explained above, you need to know the programming language to be able to make EA. If you do not know it, then you can also request to be made by the service provider to make EA based on the trading system that you have tested yourself.

    Free EA Forex

    The free trading robot referred to here is made by certain individuals, then distributed to others without charging a subscription fee. It's just that, free Forex EA like this is usually less reliable and requires modification before it can be used safely. Some examples can be seen at Forex Trading Robot Bank (EA).

    Paid Forex EA. 

    Many reliable trading robots are traded online. To use it, you just have to pay a certain fee.

    Bottom line

    Automated trading robots or expert advisors have their advantages and disadvantages compared to manual trading.

    Its superiority is that it is more disciplined with the rules of the trading system because it does not involve emotions.

    However, currently the weakness of trading robots is that they are mostly based on technical analysis, so many robots fail when news trading has an impact on the market.

    If you try to rely on a trading robot, you can also monitor it to act as a backup driver, if the robot is considered to be a security risk to your trading account, you can take over manually close.