CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69.50% 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.

Getting started with AOS: The main advantages and disadvantages of trading robots

They save you time, if programmed correctly they can execute trades without any error, or they can alert you to a potential trading opportunity that has just appeared in the markets. Trading robots are an increasingly popular tool for many traders. Therefore, in today's article, we will introduce the basic distinction of automated trading systems, what are their main advantages and disadvantages, and advise you where to start with the creation of AOS.

They are called in many ways, sometimes you can find them under the abbreviation AOS (automated trading systems), sometimes under the name AlgoTrading or EA (expert advisors). However, among traders, the familiar term "trading robot" is probably the most popular. These are programs that, thanks to implemented rules and predefined procedures for following them, can do what is defined in them. In our case, opening and closing trades in the trading platform.

 

AlgoTrading enjoys a high popularity among all kinds of traders nowadays, but it should be noted that the category of automated trading systems includes quite a wide range of trading support programs. Thus, not every "robot" will start to execute trading orders once it is switched on.

Types of automated trading systems

According to the degree of autonomy, AOS are divided into fully automatic trading systems and semi-automatic trading systems. Below we describe the basic characteristics of each.

 

Fully automated trading systems

This includes all programs that can enter a trade independently (subject, of course, to strict adherence to the rules you set), set stop-loss and take-profit on such open positions, and then exit the trade, depending on the level of programming. Trading robots falling into this category can also handle technical analysis to a certain extent.

 

Thus, if you decide to trade Forex, for example, and you acquire or program a Forex trading robot, it should be able to trade completely without your input (provided, of course, that you set the rules for entering and exiting the market and for position management correctly). If this seems risky to you, know that it doesn't work that straightforwardly. It's not enough to download a program, plug in the numbers, and then just put your hands behind your head. You need to test your robot properly before you start to indulge in AlgoTrading. But more about that next time.

Semi-automatic trading systems

Sometimes you need to enter the market really quickly and have precise stop-loss and take-profit levels at the same time as you enter. If you get a program that allows you to do this, you've got yourself a so-called semi-automatic. You can find a huge number of these on the internet and all of them can make trading much easier if used correctly. However, they never trade autonomously. Rather, they are programs that extend the original function of the trading platforms. So, while some semi-automated machines help traders to enter orders into the platform faster, others, for example, beep to alert traders to an emerging potential trading opportunity.

Nástroj IndSDL patří k poloautomatům, které vás zvukovým signálem upozorní na blížící se obchod. IndSDL je součástí strategie na scalping DAX a NASDAQ v podání Jardy Tupého
The IndSDL tool is one of the semi-automatic tools that alert you to an approaching trade with an audible signal. IndSDL is part of the DAX and NASDAQ scalping strategy by Jarda Tupý

Obrázek. č.2 Poloautomat EAVisualOrdering pro pokročilejší zadávání obchodních pozic v platformě MT4
Semi-automatic EAVisualOrdering for more advanced position entry in the MT4 platform

Advantages and disadvantages of AOS

The use of trading robots understandably has its advocates in the AlgoTrading community, as well as outright opponents who refuse to entrust their hard-earned money to a jumble of ones and zeros. Let's take a look at the pros and cons of using AOS.

 

Benefits

 

Tirelessness

Unlike humans, robots are tireless workers. So while a human who is exposed to the markets for too long will start to make mistakes over time, an AOS can trade constantly. Unless the markets are closed or you lack the necessary capital. Similarly, it is possible to run multiple robots in multiple markets at the same time, if you dare and have your robots properly tested.

 

Error free

As we have already mentioned, automated trading systems are actually algorithmically functioning sets of rules and actions written using programming code. As long as the code used to write them is error-free and the parameters you specify are also error-free, the trading robot cannot make a mistake. Thus, there is no overclicking or not noticing a certain price level. In case what the robot has been instructed to trade in way A appears on the chart, it will trade it in way A. If not, you need to look for a bug in the settings or the code itself, i.e. on your side.

 

Disadvantages

Complexity and errors at the code level

It takes barely a few minutes to find and download a trading robot these days. It's just that none of the robots available like this are designed in such a way that you just download, install and turn it on. You need to set it up to trade in your chosen market, test it and then run it. However, if there is something wrong with the robot at the code level and you do not have the necessary programming minimum, you are at a dead end. We are not saying that you need to know how to program to use AOS, but you need to know certain essentials before you can run AOS.

 

Analysis of fundamentals

Not all trading instruments can be traded using technical analysis, in fact we do not even recommend it. Every trader should have at least a basic understanding of the most important macroeconomic indicators and their impact on the markets. This is for one simple reason - trading robots do not have it. While technical analysis relies on statistical data, which Algotrading programs "group" without problems, economic reports, central bank meetings and other pillars of fundamental analysis, their algorithms cannot handle.

EA - Expert Advisor
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An automated trading system.
Stop-loss, SL
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A protective order which enables closing a losing position on a predefined level. After activation it is executed as a MARKET type order.
Take-profit, TP
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An order which enables closing a profitable position on a predefined level. After activation it is executed as a MARKET type order.