To increase the profitability of trading on the stock exchange, some private traders and investment companies automate the process by using stock exchange robots. We tell you how a computer program changes the trading process. And whether you need it.
What is a trading robot and how does it simplify trading?
It is a program for automating transactions on the stock exchange. Roughly speaking, a trading robot contains a set of rules: when to buy, when to sell, what factors to consider first and what to ignore when making transactions. It looks like the work of a professional trader, only everything works automatically.
To understand how a robot simplifies trading, imagine the following. For profitable trading a trader during the day needs to keep in his mind at the same time statistics and news background on stock exchanges of other regions, corporate reports of companies on shares. And also analyze charts and take into account the change in the value of securities in the past, monitor macroeconomic reports and so on.
This is the basic principle of a trading robot. It simultaneously analyzes charts, news, company reports and other priority information. Next, the robot either trades itself, or the trader does it. At this point, stock trading robots are divided into two more types.
What types of stock trading robots are there?
There are two main types of stock exchange robots: automatic and semi-automatic. With the first ones the whole process is automatic. The robot is connected to the trading account and makes transactions itself. Such robots are able to calculate conditions for buying, selling, risk level and behavior in case of force majeure situations on the market.
Semi-automatic trading robots are also called advisors. They analyze charts, company reports, news background. And give you a recommendation: buy, sell or hold.
How popular and safe are trading robots?
Robotic trading is popular. According to the Russian Central Bank, by April 2018, up to half of all transactions on the Moscow Exchange were made with the help of computer aglorithms. Abroad, their number reaches up to 80%. And by 2025, assets worth more than $16 trillion will be managed by robots, according to Deloitte analytics.
Such volumes of transactions are made by professional robots. They are created by a team of programmers and mathematicians. Free robots, which are available on the Internet, are most often unsafe: they are initial developments, raw demo versions. In private developments, increased attention is paid to the fault tolerance of the program and its operation in conditions of sharp and sudden price hikes.
When can a trading robot be useful?
If you have decided to buy securities and form a portfolio yourself, a well-customized stock trading robot will help simplify the process. The amount is also important here: it makes sense to trade using an algorithm if the investment starts from a million rubles. This is due to the fact that a stock exchange robot needs “space” for a turnaround. It is hard to manage the risks of a portfolio, which is collected from a couple of securities for a small amount.
What are the criteria for choosing a robot?
Here everything is simple. Look at the profitability of the robot in the past, the level of risk and, in principle, the openness of the system. Do not agree if you are forced to buy a black box with unclear conditions. Do not agree if they tell you only about profitability and omit the risk, i.e. the acceptable percentage of lost money.
When choosing a trading robot, remember the importance of minimizing risks. It is ideal to have several robots with different trading strategies connected to your account. This way you will not be dependent on one system and are less likely to encounter force majeure events.
If you need help choosing a stock trading robot, contact our financial advisor. It’s free of charge.