67.90 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.90 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Automated trading systems

Trading robots are used for their tirelessness and efficiency by large investment houses or hedge funds and professional or even retail traders, for whom they save time. This article will serve as a stepping stone if you are thinking about automating your trading strategy.

What are Automated Trading Systems/EA (Expert Advisor)

At their core, automated trading systems are actually fairly simple programs designed to perform pre-programmed actions on your trading account. These actions are performed in a specific sequence according to procedures they have implemented in code. In its simplest form, these sequences can look like this: "when the price on instrument X reaches Y, do Z".

There are a variety of automated trading systems, from the simple ones that just refine order entry or alert you about specific situations on the chart, to fully autonomous trading robots (also called Expert Advisors). These can automatically evaluate technical analysis to some extent, open and close trading positions and set stop loss and take profit levels. With the right programming and backtesting, you can have a tireless trading assistant. If you ever hear the term AlgoTrading, it is these more advanced versions of the programs.

What EA enables

Perform basic technical analysis

Technical analysis is actually a statistical model of the probability of future price development based on historical data. These are all numerical data that trading robots can process and then trade based on them.

 

Execute trading orders

It will probably come as no surprise to anyone that entering and exiting the market is one of the basic prerequisites for an automated trading system. However, where EA excels over its human counterparts is the speed with which it handles these orders. Some trading opportunities may last only a few seconds - fortunately, trading robots operate within milliseconds. On top of that, they can trade on several instruments simultaneously.

 

Precise risk management

If you can summarise your risk management rules into "ones and zeros" or simple logical statements, congratulations, you have the opportunity to teach them to your trading robot. Every trading position opened using the AlgoTrading program can be protected by a stop loss or take profit just as you would manually. The only difference is that the robot will do it many times faster and without thinking.

 

Nonstop trading without emotion

Trading is a very psychologically taxing activity. It is not for nothing that it is said that well-managed emotions and a rational approach are half the battle in trading. There are so many psychological traps that can drive traders into trouble - over-trading, greed, or on the contrary, chasing the perfect opportunity and not opening a position, fear... All of these are unknown to trading robots. Just give them clearly defined orders and they will follow them to the letter.

Weaknesses of the Automated Trading Systems

Bugs in the code and lack of backtesting

As we have already written, an automated trading system only executes the orders that have been given to it in code. If they are entered correctly, there is nothing to worry about - the trading robot will execute them to the letter. However, if the trader/programmer overlooks an error at the code level, he may be very sorry later. In the best case, the automated trading system will not work, in the worst case it may even wipe out the unfortunate trader's account. Therefore, every robot must be thoroughly backtested before running on a live account. Demo accounts are best for this purpose.

 

Stable connection

To execute orders correctly, every trading robot must have constant and stable access to the internet. So whether it is running on your computer or on a dedicated server, the trading robot must be constantly on and connected to the internet with the lowest possible latency. While a trader will know when he or she has a weak internet connection, a trading robot may not (unless it is programmed to notice it). This can lead to poor trading performance.

 

Fundamental analysis

Unlike technical analysis, the fundamental analysis does not rely on numerical data, but rather on market sentiment, influenced by geopolitical, macroeconomic, and other events and data from economic reports. This makes it something completely elusive for trading robots. Therefore, any trader who is using expert advisors should be wary of trading during the announcement of important fundamentals.

What types of trading robots exist

Automat

Here you will find true fully automatic trading systems that can independently open and close trades, set stop loss, and take profit levels or perform technical analysis.


Semi-automatic

This category includes various programs, plug-ins, and add-ons that extend the original functionality of trading platforms. For example, they allow traders to enter trade orders in a more sophisticated way or to be alerted in time about an emerging trading opportunity. Semi-automated machines never trade independently. Below, for example, you can see the semi-automatic program that allows you to enter the market with one click on the MT4 trading platform with Stop Loss and Take Profit values already set.
 

Poloautomat EAVisualordering

A semi-automatic called EAVisualordering

Do I have to be a dev to use trading robots?

Although you need to know at least basic coding techniques to create an automated trading system from scratch, there are plenty of ready-made trading robots available on the Internet. These are often available for free, but traders should really test them carefully on a demo account before running them. This is because they risk losing their own capital.

Automated Trading Systems and trading platforms

MetaTrader 4

This most widely used trading platform still has its dear place in the hearts of many retail and professional traders. Although it is far from being new, its strengths lie in its high degree of modifiability. This makes MT4 platform suitable for the implementation of automated trading systems using its own MQL4 programming language. Only in the case of MT4, we don’t call them “trading robots” but rather EA (expert advisors).

If you decide to run an EA on the MetaTrader 4 platform, you will find support in the huge and still vibrant community of other traders using this platform. Its members not only advise each other on how to program, backtest or run an EA but also often place their finished trading robots on the Internet for free download.
 


cTrader

In addition to a user-friendly environment and sophisticated risk management and order entry features, this significantly more advanced trading platform offers the ability to program, backtest and run automated trading systems. In the case of cTrader, these systems are referred to as cBots.

These cBots are written in the much more widely used C# language but are used by a community of traders that is not nearly as widespread compared to the community around MT4. So if you decide to automate your trades on the cTrader platform, you have slightly poorer options. However, this minor shortcoming can be compensated by the fact that the C# programming language in which cBots can be programmed is far more widespread in the programming community compared to MQL4 (the MT4 language). Therefore, if you are not proficient in C# programming yourself, an automated trading system can be created by a programmer proficient in this language.

Who is EA suitable for?

The biggest advantage of automated trading systems is speed, accuracy, and unlimited energy. For these qualities, trading robots are most often used by intraday and scalping traders. On the contrary, for swing traders who open their trades once in a few days let alone weeks, the implementation of trading robots does not make much sense.

Key terms

Where do I download the MT4 trading platform?
Show answer

You can download the MT4 trading platform for free via a link that will be a part of the Welcome email. 
 
If you don’t feel like searching your inbox for the Welcome mail, you don’t need to. Just download the MT4 HERE
 
We offer MT4 in versions for PC (Windows, MAC) or Android and iOS mobile operating systems.

Where do I download the cTrader trading platform?
Show answer
cTrader trading platform can be downloaded for free HERE. We offer cTrader in versions for PC in the form of a desktop application (Windows, MAC), web application, available in any web browser (Windows, Linux, MAC) or Android and iOS mobile operating systems.
Day trading
Show answer
It is a strategy where a trader enters a trade on one day and exits the trade on the same day.
EA - Expert Advisor
Show answer
An automated trading system.
Fundamental analysis
Show answer
In fundamental analysis, the forex market is analyzed using macroeconomic data, social or political influences that can affect the demand for a given instrument.
Risk management
Show answer
Risk management means the implementation of rules to ensure control of the account in the event of adverse events. Examples of these events include a change in interest rates, a change in the exchange rate of a currency pair, a lack of liquidity. Risk management tools include such things as a trading plan, the use of stop losses, setting a maximum amount a trader risks in a trade, etc.
Scalping
Show answer
Trading strategy type which uses minimal market moves with higher frequency of trades made in order to make a profit.

 
Technical analysis
Show answer
Technical analysis is a form of analysis where the trader examines the price. Charts are used for analysis to show the movement of the price. The assumption is that all the information is already contained in the price.
67.90 % of retail investors lose their capital when trading CFDs with this provider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.90 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.