Trading robots or bots are computer programs that perform sending automatic orders to a broker. Contrary to popular imagination, there is no intelligence behind it, but predetermined rules for making purchases and sales.
However, robots have no feeling, nor do they get tired. In this way, they execute orders with greater precision. In other words, the program will respect previously informed limits and instructions.
In fact, automated execution makes the trader’s life much easier, being used even by large investment funds and professional managers. However, this does not necessarily mean that decision making is done by a trading robot.
What are bots, or trading robots?
Trading robots are a computer program that receives quotes from some platform and, based on a pre-determined rule, sends buy and sell orders. In fact, any intelligence of these bots depends solely on their author’s definitions and instructions.
However, it is possible that the engine itself makes adjustments and corrections according to its performance. This mechanism is known as artificial intelligence, but there is no guarantee of improvement when it comes to an environment as volatile as the financial market.
How does the trading robot work?
This computer program can be connected to any trading platform, usually using API technology, or “Application Programming Interface”. In short, API is a standard for accessing software, allowing integration with different platforms.
The advantage of the API is that this intermediary, whether it is a stockbroker or a cryptocurrency exchange, does not have access to the intelligence behind the software. In this sense, the algorithm that makes the trade decisions can follow the most different indicators and methodologies.
Thus, there are robots that use technical analysis that is, moving averages, Relative Strength Index (IFR), among others. However, there are more complex systems that use the most diverse classes of data.
As a writer, Richard is an advocate of blockchain technology and cryptocurrency in general. He writes about all things from cryptography to economics, with a focus on how it applies to cryptocurrencies. He is also passionate about writing about topics such as decentralization, open-sourced software development, and copyright law.