Robotrading is the process of using a set of instructions for placing bids to buy or sell shares, money, or cryptocurrency. The instruction set is based on various market indicators, including price, time, volume, and others. When traders are getting tired and do not have time to trade manually, they think about moving to robotrading. But the threshold to enter this area is quite high, especially for a person who has no special financial or technical education.
About the transition to robotrading and free time
If the private investor focuses on profits, understands the difference between manual and automated trading, and has some programming skills, they should at least think about switching to automatic rails. The effectiveness and scope of work are increasing: people just perform more and better. By trading automatically you can cover more exchanges, use more tools and strategies. But it doesn’t mean that you don’t need to monitor automatic operations like manual ones. Do not forget about monitoring, it’s always important to keep your eyes open.
Any trade, whether manual or algorithmic, requires effort and full involvement in the process. If you want to earn, you have to spend a lot of time on trading. Ideally, you should have a full working day, when you cannot just write code and go relax. Of course, you will not be attached just to one place, you will be able to travel around the world but only if you are always online. But it’s definitely not about lying in a hammock under a palm tree for days.
About fiat money and cryptocurrency
In programming terms, there is no difference between what you are trading, fiat money or cryptocurrency. The main thing is to create a good mechanic trading system. There are algorithms that can be used effectively whether with conventional currencies, cryptocurrencies, or stock shares. It’s not important what tool is applied for entry. What does matter is whether or not the rules implied in the algorithm describe behavior of the specifically selected tool. So here is the question of the initial trade idea formulation and strategy. In any case, when an algorithm is developing, the behavior of a particular trading asset is taken into account.
About benefits, risks and foolish mistakes
The greatest advantage of automated trading over manual trading is a lack of emotions. People often make decisions based on feelings and emotions and it does not always have a positive effect on the results, especially in critical moments. In contrast, the algorithm simply performs its work without any emotions or excitement; it does not take impulsive decisions and trades on strictly specified strategy. And if the algorithm is started, the trader could not intervene and change something.
Of course, there are risks, and they are usually market risks. The algorithm trading idea may stop earning at some point when any unpredictable events and crises occur on the market. Most robots cannot trace the signal. You will have to track these cases and change your robots in time or disable them. There is also a small risk that the exchange will fail you.
Moreover, programmers could sometimes make silly but serious mistakes. A simple algorithm has the cost and the price. Of course, in order to make income, your price should be higher than your cost. If you confuse them, your robot will be unprofitable. Often newbies face this problem. As a result, a very simple mistake at any stage leads to enormous losses.
Any specific skills will be very useful. By saying any specific skills, primarily mean good knowledge of mathematics and logic. It’s more about clear logic and understanding of how to write a formal trading rule rather than about mathematics because you don’t need any algebraic transformations at the early stages. There is a clear distinction between the feeling of how to trade and the ability to describe the trade logic in a formal set of events and actions. At this step, we need mathematical knowledge. Also, programming skills and command of basic program languages (for example, “the C”) are essential.
About the pitfalls
Sometimes you seem to come up with a profitable strategy, stunning and working trading idea. You weigh it up in any mathematical modeling program, for instance, Mathcad. Then, you look at the data, design a data model, and make required calculations. After that, you include all the commissions and surcharges, and everything works fine. By the way, by no means, don’t kid yourself, include all the payments, it’s vital. But then you realize that technical implementation of your idea needs more money than you can earn from this idea.
Once upon a time, one private investor made a magnificent trading robot, named Panda. It generated an 8,000% return over the course of three months with almost no initial risk. Panda was discussed and hyped a lot, but it really worked well. But the thing was that the robot made this money from the initial capital in 1 thousand, while the monthly support for the entire technical infrastructure required to sustain the project cost around a 10 thousand. Thus, it was initially an unprofitable project, because it couldn’t even cover all costs for electricity, powerful servers and computers carrying out calculations for the project Especially, one should remember that the robot earnings are not always high, but the money for maintenance is to be paid steadily. So, it is important to calculate not only how to earn, but also how much you have to spend in order to earn.
About fast money
It is clear that robots can be configured differently, it depends on the volume of trade, what leverages and loans are used when trading, whether you invest money on your own or on someone’s behalf, etc. There are a lot of nuances. But in general, you can earn little by little every year with almost no risks by trading for ten years at 10% per year, or you may try to trade one year at 100%.
But there is a law in the stock market that you won’t be able to cheat — the higher the potential return, the greater the potential risk. It’s as strong as the rule of supply and demand. So, if you count on big money, be ready for big losses. This rule cannot be avoided and should be taken into account when it comes to return on investment (ROI) or algorithmic trading profitability.
About platforms for newbies
There are some platforms that allow anyone to trade without skills of Trading. For example, Libertex is the most famous platform, but there are many others. It is a good option for a newbie to try and see how it all works.