Algorithmic trading (algorithmic trading the)

Algorithmic trading (algorithmic trading the)

Algorithmic trading (algorithmic trading the)

Trading using expert advisors and robots continues to gain popularity among traders. The so-called algotrading, according to beginners – is a path to rapid wealth and financial prosperity. But is everything as good as it seems? Is there a catch?

In this article, we talk about algorithmic trading from the inside, identify its pros and cons, and identify alternatives. And they really are. After all, the main weapon of a trader is not the trading tools that he uses, but his head.

What is algo trading?


This concept appeared quite a long time ago. The first automatic trading algorithms were used in the stock market. However, they quickly moved to Forex, and algo trading became popular.

The trading algorithm or adviser is based on a specific Forex strategy. In General, there are two types of Forex expert advisors – automatic and mechanical. The first perform all actions independently. The latter only give trading signals. The decision is made by the Forex trader.

The first and second have their advantages and disadvantages. Fully automatic algorithmic trading requires a minimum participation of the trader. In this case, it only installs the program on your trading terminal, configures it and then it works offline.

Algorithmic trading using mechanical trading systems involves the participation of the trader in the decision-making process. In other words, transactions are not opened automatically, but only by the trader.

Automatic Forex trading algorithm has the following advantages:

excluding emotions from trading;
there is no influence of fatigue and other distractions;
work exclusively on the system.


As for the disadvantages, algorithmic Forex trading has the following disadvantages:

it "does not know how" to adjust itself in the event of changes in the market situation;
Forex robots are not able to change the algorithm in case of unexpected market events;
decision-making is based solely on the built-in algorithm, and there is no flexibility in the work.


By and large, mechanical algotrading has all the same advantages and disadvantages. The only difference is that the final decision to open a position is made by the trader. Accordingly, such mechanical systems can be used as an auxiliary filter for the trader's strategy.

Algorithmic Forex trading – is it worth using


Many novice traders start their career by searching for the most reliable and profitable robot. Of course, this is a road to nowhere, and there is almost no chance of success in this case.

The fact is that such robots that could bring income to the trader in any situation simply do not exist due to their very nature. In modern expert advisors, there is only one algorithm-a strategy.

In other words, let's say the robot is working with some kind of reversal system. In this case, the best time to trade it is flat. But the market is beginning to trend, and each time such a robot will open positions in places where the trend temporarily stops. And there are such trends when there are only small corrections. And such trades against the trend will be obviously unprofitable.

On the other hand, trend advisors will work well during periods of trends, but they can make mistakes in moments of flatness. And here the question arises: is it worth working with such systems at all?

If you use automatic expert advisors, You will have to constantly monitor their operation yourself. By and large, this is a fairly large layer of work that negates the advantages of automation.

But mechanical advisors can be quite useful as an additional hint when making decisions. Let's say You have some strategy of your own and you get a signal from it. At the same time, a signal is received from the mechanical trading system. In this case, the Forex trading algorithm acts as an auxiliary tool for making decisions.

The only thing we don't recommend is expert advisors based on the martingale strategy. They are often advertised on different sites and sold under the guise of very profitable robots. But in fact, most of them lead to the same result – the loss of the Deposit.

This type of Forex trading algorithm is based solely on increasing positions using the martingale system. Therefore, Your Deposit will always be at risk.

Algorithms of course can be used. But do it wisely. You can't trust trading exclusively to an adviser. It needs to be constantly monitored and monitored.

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