Pros and cons of trading robots


Good afternoon, dear readers!

We all know that every medal has two sides. This conclusion is also true for trading technology using robots.

One of the benefits of using robots is speed. A trading robot can track dozens, hundreds of quotes of securities, perform the most complex calculations instantly, make a decision and immediately place orders. A person will never be able to analyze so much information so quickly. Also learn more about trading bot for kucoin

Traders who use large volumes of complex calculations in their trading system and entrust trading to a robot gain an advantage over their colleagues who trade the old fashioned way. Traders who do not use robots are forced to reduce the number of traded instruments, increase the time intervals (timeframes) used, and abandon promising, but complex trading systems.

The next positive aspect of using trading robots is accuracy. The trading robot does not make mistakes (unless, of course, an error has crept into the program code when it was created), all input and output data can be calculated with an accuracy of several decimal places, if necessary. When submitting an application, the robot will not accidentally type an extra zero and will not put a comma in the wrong place. Traders who trade manually can sometimes make mistakes both in calculations and when placing orders. A well-designed trading terminal can protect against some of these errors, but there is still a chance for an error.

Further, to the advantages of using trading robots, one should add such significant factors as fatigue and scalability.

The trading robot does not get tired, it is ready to work 24 hours a day. You can go about your business, work, sleep, relax, and your robot will trade. If you trade manually, you will not be able to spend 100% of your time at the computer, even if the trading session on the exchange is only 8 hours. Leaving the computer, a trader may miss an important entry or exit signal, and this may cause losses.

If you want to add functionality to your trading system, you only need to add code. For example, you can receive beautiful reports and charts at any time, you can set up notifications from the robot via SMS, you can complicate your trading strategy indefinitely. When trading manually, you will have to spend more of your time if you want to expand your trading opportunities, or even hire additional assistants, or refuse to expand your activities.

And finally, the biggest advantage of trading robots is that the trading robot is not subject to emotions. Very many traders, especially beginners, having undergone an emotional impulse, make transactions that contradict the logic of the trading system, and in most cases such transactions turn out to be unprofitable. A trading robot always strictly adheres to its logic. He does not listen to “gurus” in the smoking room who know exactly where the price will go, he is not afraid of three losing trades in a row, he does not have a bad mood.

Personally, I am convinced that the inability to control your emotions in trading is the main cause of failure in trading in the stock markets. Of course, creating your own trading system is not easy, but with due diligence, many people cope with this task. But not many people can consistently trade using their system. And this is where trading automation comes to the rescue.

Summing up the above, we can conclude that the advantages of trading robots are:

1. Speed

2. Accuracy

3. No fatigue

4. Scalability

5. Not subject to emotions

To complete the picture, let's consider the negative aspects of using trading robots.

Well, first of all, this is of course the complexity of manufacturing a robot (writing a program). You can develop a great trading strategy but not be able to program it. Even if you are a programmer, you will need to learn a new language, and if you are not good at programming, then it will be even more difficult for you. You can order the writing of a robot, but you cannot be sure that the programmer will accurately describe the logic of your strategy in the program and will not make mistakes, and in the future you may have difficulties if you need to modify the code or expand the functionality.

There is also an option to buy a ready-made robot, but, in my opinion, this is the worst option. First, you need to know exactly how your robot works, and purchased systems are mostly black boxes. Secondly, I personally have a suspicion why the authors sell “machines for making money”, and do not earn money on them themselves.

Another disadvantage is that the trading robot can only use technical analysis. You will not teach him to read news and company reports and assess the market situation. Although now the direction of creating robots based on neural networks, the so-called "learning robots", which can already assess the situation on the market, is gaining momentum, according to certain criteria and within certain limits, of course.

When trading using MTS and robots, you will have to put up with such a state of affairs that you see the situation very clearly, but the robot trades in the opposite direction. It is impossible to stop and change the logic of "MTS" if the level of unprofitability of the system is within the permissible range. The only thing that can be done is to analyze this situation and, if necessary, make changes to the algorithm, while carrying out the entire testing process again.

The trading robot cannot make decisions in non-standard situations. It only executes the logic embedded in it, and in case of problems it will not be able to change anything.

Of course, in the program you can lay the robot's reaction to some situations, but it is impossible to foresee everything. For example, if the connection to the Internet is lost, the robot will not be able to continue trading or at least close an open position. A trader trading manually in this case would call the broker and close the position, or restore the Internet. The computer may freeze, the program may close with an error, the broker may not accept the order or accept it, but with a long delay. The trading robot will not be able to respond to all events and this may lead to unplanned losses.

The lack of emotions, one of the advantages of a trading robot, is also a disadvantage. The robot can sink all your capital in one day without any embarrassment. This must be taken into account when creating a robot. For example, allow the robot to trade only a part of your capital, or make it so that when a certain threshold is reached, the robot notifies you and (or) stops trading.

Thus, the following can be attributed to the negative aspects of using trading robots:

1. The complexity of creating robots and writing programs

2. Using only technical analysis and mathematical methods of data processing

3. The inability to correct the actions of the robot when making transactions that go against the market situation, which is absolutely clear to the trader at the current time

4. Inability to make decisions in non-standard situations

5. Lack of emotion. Can sink the entire capital in one day, "without blinking an eye"

Concluding the consideration of the pros and cons of using trading robots, I want to say that the negative aspects can be largely leveled by a professional approach to creating a robot, the algorithm of which will take into account actions in non-standard situations. But at the same time, of course, there is no way out of the complexity factor in the process of creating robots, this is the main limiting factor, which can be overcome only by spending a lot of time on learning programming.

On this I say goodbye to you, I wish you success in trading.

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