How to select a Forex robot. What you should know
Category : Robots
A modern trader’s toolset has been expanded several times, which makes them use more and more displays. Interactive graphics, automated candle models, modified technical indicators, and trading robots – these tools are now utilized by almost every trader.
We’ll talk about trading robots today, take a look at their specifications and variety, and most importantly, identify key points in searching for an effective algorithmic trading strategy.
A trading robot is a piece of software that is designed to automatically analyze a financial tool in the FIX API Forex to make buy and sell transactions without a trader’s participation. In other words, the program allows a trader to automate the trading process. Every FIX API trader has their own individual trading system by which they trade, analyse, and make effective decisions. This algorithm of human-market interaction can be converted into code. A trading robot is an effective tool in a trader’s work, as it frees up more than 90 percent of working time. The trader only needs to optimize it under market conditions.
As I said, the robot mirrors the trader’s system. But over the past few years, many new automatic systems appeared which make it possible to net a profit in the market. Thus, it can be used not only by traders but also by investors for whom a trading robot is a source of passive income. The emergence of many new trading algorithms has led to the need to classify them as follows:
- Trend-based robots: these operate only by analysing a trend and determine the most advantageous entry points on the basis of all the same trend indicators;
- Grid robots: the essence of these algorithms is that several pending orders are set on the graph, based on the specified parameters. This creates a “grid” which consists of simultaneous buys and sales from the specified levels. To determine these levels, traders often use the support and resistance zones, Fibo indicators, pivot levels.
- Robots based on technical indicators: Perhaps the simplest type, where transactions are performed on the condition that the specified indicator parameter or signal is reached.
- Trading robots based on integrated trading systems: popular trading practices and trading systems are getting improved for working in automatic mode.
- Scalping robots: the essence of the algorithm is in committing large numbers of transactions to get several pips of return on each one. The financial result is due to the effective analysis and low spread. Note that these robots can be based on virtually any condition for opening positions.
- Arbitration robots: similar to scalping robots, they commit many micro-transactions, but the key difference is that in FIX API arbitration trading, the difference in the value of the same currency pair at different stock sites is taken into account .
These are the main types of trading robots that are on the market. These types need to be well-known and understood to find a working algorithm that satisfies the trader with the result. However, knowledge of the types only will not suffice.
The key points to be taken into account when selecting a trading robot for a FIX API Forex trader:
- The algorithm that the robot is based upon. The type of the robot shows its core working principle, while the algorithm provides an understanding of the methodology and specificity of analysis and conducting trade transactions;
- The availability of updates. When you buy a robot, you should also take note of the updates. Forex market is not stationary, and the algorithm needs to be adapted under these conditions. The best way to buy an algorithm is to sign an update support contract.
- Work timeframe and the list of trade instruments. You should understand which currency pairs the trading robot works with, so that you can compare it with the specifications of your FIX API Forex broker.
- The parameters of risk and money management. The trading volume, allowed drawdown levels, maximum load on deposit are the key trading indicators. The trading robot must be flexible in this respect and adapt to your deposit. Static algorithms that have a fixed amount or do not even include these parameters in their method of opening the orders, should be avoided.
- The historical yield of the robot. The best opportunity to analyze the algorithm is to analyze its financial result. If a robot can be tested on historical quotes in the strategy tester of the FIX API MT4, this will be a clear advantage.
These are the key parameters that I recommend to take into account when you select a trading robot to work on Forex. This competent approach allows to choose a working algorithm that makes your trading profitable.