An algorithm is a set of step-by-step instructions that tell a computer how to accomplish a task, like detecting objects in an image. A trading bot is, indeed, just a computer program: it scans incoming data and instructs the computer how to react.
Remember when we said that AI was the most important technology of our lifetime? Things get interesting when you mix the ability of AI with millions (or billions) of dollars, leading to what some call a “trading arms race.”
What is the definition of trading bot?
Trading, by nature, is a gamble. The more data researchers have access to, the more they can gauge future stock prices. Big, fast data sets allow researchers to test ideas faster than ever and create better programs. The biggest, fattest data sets come from exchanges like Nasdaq and the NYSE, where a staggering amount of information is being constantly sent.
How does a trading bot work?
The beginning of every working trading bot starts with a developer writing code based on some hypothesis about what information is relevant for making trades and where it might be found. The developer will then run the program and see if it makes any "smart" trades; if it doesn't, it's back to the drawing board (or debugging).
More likely than not, the program will make some trading decisions that are suboptimal. The developer can then use that information to improve the program—and the loop repeats. Usually this process happens with human oversight where someone manually inputs trade and market data and evaluates the output of the trading algorithm.
However, some developers have created entirely automated trading algorithms that operate as separate entities from human traders. Also known as bots, these programs can operate continuously and 24/7 using real-time market data to equip themselves with information that most benefits their performance when it comes to hitting specific trading targets.
In essence, a trading bot automates trades. It can perform research, evaluate sentiment in capital markets (i.e., social media platforms) and trade accordingly (long/short positions), depending on specific metrics within its coding framework. There are also robo-advisors that come with some pre-programmed rules and execute trades accordingly (but don't read too much into this word).
How does an open-source trading bot differ from a commercial one?
Commercial trading bots offer some unique features for users like technical support and integrations directly into brokerages or exchanges. You can pay for these features if you want or you can use a free open-source option like Zenbot. This powerful platform has many of the capabilities of a commercially available platform but is free to use and less cluttered then some competitive offerings. So you might ask, "Why pay for something when I can get it for free?" But reviews reveal some paid products offer more robust decision-making engines that can dramatically increase your bottom line.
You have several options when choosing a trading robot: we recommend that you should start by taking a look at the robotbulls.com platform. It has over 2 years of continuous success in trading, stocks, cryptos, green companies and since the beginning of the crisis they have also started trading commodities like oil, gold, silver and more. Create your account in less than 2 minutes at app.robotbulls.com.Sitemap