What Is Algorithmic Trading? Explained Step by Step
Here we are going to explain step by step what algorithmic trading is. Furthermore, you will learn how this can lead you to an edge in the finance market. This leads you to more consistent and great results. There’s a lot of courses trying to push you to some type of scheme. However, here we want you to really learn about how it works. You will learn how to extract the best of what algorithmic trading can bring to you.
How does an algorithmic trading bot work?
Algorithmic trade is a method of operating in the stock, crypto, and forex markets. Algorithms make the market analysis. Therefore, you have a bot analyzing multiple markets. It brings some insights for you just to enter at the right time. Sometimes, they make the operation by itself. They use programmatic instructions for variables like time, price, and volume of the candle stick. This determines the enter time and the direction (buy or sell) for you to make your position.
The system behind the trading bot
This is how the system was programmed. There are the forex currency pairs, and there can be any type of stocks. The bot will monitor the market using some indicators to track if there is any signal for any direction to send. In fact, this trading bot uses a 2-step system to send a powerful trading signal.
Step 1: Analyzing the Market
In this step, the bot uses some indicators like: EMAs, Awesome Oscillator, MACD, Bollinger bands, and Stochastic Oscillator. The objective here is to find the signal and evaluate its power. Then, it continues to the next step.
Step 2: Signal Filter
In the second step, the bot filters the signals. It does this by using RSI and confirmation of volume of the candle stick. Specifically, it evaluates in the last second before sending the signal if it is following the trend of the market. Consequently, this determines whether to send the signal or to discard it.
This is an example: the bot found some signals. But, in the last time, they were not confirmed by the filter indicators. As a result, they were discarded.
After sending the signal, the bot will cool down for 10 minutes. This is to send you the results. After this, it will take 5 minutes to send you another signal.
Trading bot profitability
The bot had several times of backtesting to know the profitability. With all the market changes, we could get a 70% winrate. So, here has a projection in how much you can gain with the trading bot:
- 1.000 dollars of capital
- Entering with 2% of this in the trades and getting 70% of winrate
- By the end of the first month you will have a profit of $720.
- In the second month with $1,720 of capital to invest, using 2% and the same 70% winrate.
- At the end of the second month you can get $1,229 of profit.
- In total, you can reinvest $2,958 and within the next few months only increase the profit.
The advantage of having a trading bot is that you can have the same winrate all months, in all market conditions you will have the same profitability, this increases the capital invested and you can win money very easily.
Why having a trading bot can lead you to have an edge in the market?
Trading bots lead you to an edge because they adapt based on the conditions of the market, so you can have a prospect of profitability more reliably every day.
Emotional Free Decision
The algorithm follows the rules that were programmed for it to do. They don’t have fear, and neither do they hesitate. Another good thing is that they don’t make revenge trading. This leads to a more consistent plan, avoiding drawdowns. Having less emotional decisions is better. This is because revenge trading is a major mistake. It can lead you to not have profit and also to break your funds and waste money. Here in our blog post, we have some tips on the better strategies for you. These tips help you get consistent profits in your trading journey.
Speed and execution quality
Algorithms can process a large scale of data. They can place an order in milliseconds, which us humans cannot. By this, the bot can execute and capture some fast opportunities to make money. It avoids slippage in fast and volatile markets.
Better risk management
Bots can follow the predetermined fixed percentage per trade. Also, they can use automatic stop-loss or take-profit placements. This reduces the chance of forgetting a stop or oversizing the position. By this, risk is reduced. The trading is consistent to get better profits.
How does our Trading bot system help you?
We offer a system that you don’t have the need to know programming to use. Our Trading Bot is very simple to use, it is just join in our Telegram channel and follow the signals that we send there to you.
The bot will search the market for you, finding the best opportunities. He will give you the entry point and all the details in our Telegram channel.After 10 minutes he will return with the result of the operation.
Algorithmic Trading is a money machine?
No, algorithmic trading is not a money machine. But, with discipline, consistency in your decisions in forex, stocks and crypto markets can lead you to great profits. Also learning the best strategies can help you to get consistent profits in the trading market.
Ready to see the results in real time? Join our Telegram channel today and follow the bot signals for free and experience how algorithmic trading fits into your own daily routine. If you are unsure and are willing to get more information don’t hesitate to contact us, we are here to help.