A forex trading robot is a computer script or a software application that uses a variety of inputs from different possible sources. Typically, the major component is technical analysis, however more advanced trading robots also utilize trading signals based on fundamental analysis, economic news, quantitative analysis, market sentiment measurements and various custom metrics.
The popularity of trading robots stems from their reliability, as they are devoid of human emotions and other aspects of human psychology that could be detrimental to trading. Trading robots can operate 24/7, night and day, and can easily be added to most of the trading platforms offered by brokerage firms.
Another important advantage is scalability and flexibility of trading robots, since they can be applied to any trading asset and installed on multiple instrument charts or instances of trading platforms.
There is no limitation in how sophisticated trading robots can be. The most simple ones are based on technical analysis inputs, one of the most popular technical indicators being the Moving Average. For example, the so-called “5-8-13 Moving Averages” strategy is the one that checks when there is an intersection of the 5-, 8- and 13-bar simple moving averages (SMAs). The trading robot based on this input can be run on any asset and any timeframe, depending on your preferences.
More complex robots based upon this strategy might also have a few additional checks, such as variable trade size, risk management checks, market volatility and market sentiment identification, and the logic of validation between these inputs. It makes sense to periodically test the trading robot on historical or realtime data to see if the components and their settings need adjusting or replacing.
Another level of complexity is represented by trading robots based on fundamental analysis and financial statistics inputs, for example checking listed companies’ price-to-earnings ratio (P/E ratio) and buying a stock as soon as P/E ratio drops below a certain level. A combination of technical analysis and fundamental analysis-based inputs is also often used.
At the same time, other inputs may be based on macroeconomic data related to the country and industry where the stock belongs to. For example, a trading robot that analyses various news sources by means of Natural Language Processing (such as Acuity’s Signal Centre) might identify a moment when the stock price is dropping due to negative headlines, while the overall fundamental data still suggests good outlook. In such a case, the robot might decide to “buy the dip”, purchase the stock because there is a high probability the price will bounce back.
There is a separate type of sophisticated trading robots that analyse various inefficiencies of the market and trading conditions offered by the brokerages, aiming to capitalize on these inefficiencies and conditions discrepancies: spread arbitrage, cross-broker rates arbitrage, commodities gaps arbitrage, etc. In the world of cryptocurrencies, the trading robots that identify price discrepancies between the crypto-exchanges and inefficiencies of DeFi systems are among the most popular.
Integration with trading platforms, MT4 and MT5 EAs
Most of the trading platforms offered by the brokerage firms have the option to add a trading robot. Specifically, if your broker offers MetaTrader 4 or MetaTrader 5, you might use the Expert Advisors (EAs) or Trading Signals service.
Expert Advisors (EAs) are programs or scripts that can be uploaded into the MT4 or MT5 and enable automated trading, i.e. serve as trading robots. Both MT4 and MT5 allow multiple EAs to run simultaneously. Note also that trading function can be disabled in the EA, in this case it may serve for indicative purposes.
Some EAs can be provided by your brokerage by default, but the most popular venue for purchasing the EAs is MetaTrader Market, which can be accessed in MT4 and MT5 terminal, as well as on the dedicated website. The Market allows various search options for EAs based on various criteria, including user reviews.
MetaTrader EAs are built using the MQL scripting language, and in case you want to create your own trading robot, you can use MetaQuotes MQL MetaEditor and various userguides available on MQL-related forums. Alternatively, it might be easier for you to find an EA developer at MetaTrader Freelance website, where dozens of experienced programmers are available for orders of any complexity level, so you can send them your requirements based on your trading experience and coordinate the development.
Trading Signals by MetaTrader
In addition to EAs, MetaTrader offers a service called Trading Signals. The name might be a bit confusing because this service is not limited to “signals”, but allows to copy deals in realtime from one MT4 or MT5 user to another, for free or based on a subscription model. Trading Signal provider's deals are automatically executed on subscribers' trading accounts, which makes this technology similar to trading robots. This principle can also be called Copy trading or Social trading.
According to the service rules, all Signal providers are being carefully screened for performance consistency and credibility. If a provider's results over the previous month are falling below the benchmark,this Signal will be removed from the system.
It's worth noting that a subscriber might not know if the Signal provider is trading manually or is using an EA or other method of automated trading.
VPS solution for Expert Advisors and Trading robots
Some Expert Advisors and Trading robots are designed to work 24/7 or 24/5, while the trading platform itself might have certain limitations, for instance MT4 or MT5-based EAs will only work for as long as the platform is open on your desktop. In case you shut down your laptop or PC, the EA will stop working and you might lose the market opportunities.
There is a workaround to solve this issue, it’s called Virtual Private Server (VPS). It’s a remote server, usually in a location (data center) that is optimal for trading and that ensures the fastest connection to the broker’s trading server. Having VPS is also essential for high-frequency trading, where every millisecond matters for the success of your trades, thus choosing the optimal VPS is a necessary step to ensure your EA or trading robot performance and resilience.
Although some brokerages are offering VPS as an additional service, you can also find this service available from various independent IT companies. This makes sense in case you have trading accounts with multiple brokerages.
There is no shortage in various forex trading robots and EAs, which are available all over the internet, being offered by the third parties and by brokerages directly. However, one should be cautious when purchasing and applying any automated system on a Live account.
There is no such thing as a “holy grail” in the word of automated trading systems. In some cases, forex trading robots generate profits over the short term, however the long-term performance is mixed. This is primarily because they were tested on particular market conditions and prices history. Note that any trading robot requires regular adjustments due to the changes in the underlying market conditions.
AnalysisIQ / Signal Centre Tool by Acuity Trading
If you ever thought about having the most sophisticated market analysis directly in the trading platform, which saves hours that you would otherwise spend on browsing through trading ideas, news and technical analysis charts, then you have to try out the latest AnalysisIQ / Signal Centre Tool provided by Acuity Trading.
Acuity Trading was founded in 2013 and headquartered in London, and has quickly reached the front-runner position in providing trading signals due to the unique combination of the team expertise and technologies used.
In 2017, Acuity formed a strategic partnership with Dow Jones, a leading provider of real-time financial news and information, which allows Acuity to analyse Dow Jones Newswires for sentiment data and to act as resellers of the Dow Jones news and calendar products.
Acuity Trading relies on top-notch Machine Learning and Natural Language Processing technologies in analysing various news sources, including Dow Jones Newswires, on a daily basis, in order to quantify the market sentiment for any given tradable instrument and deliver you the analysis outcome straight on the market instruments charts. Acuity’s AnalysisIQ / Signal Centre Tool utilizes a combination of technical and fundamental analysis, which can be flexibly applied to a wide range of markets - indices, currencies, stocks, commodities.
One of the first brokers that have implemented Acuity’s AnalysisIQ / Signal Centre Tool was world-famous OANDA.
Being regulated by UK’s FCA, a top-tier financial regulator, Acuity is fully transparent, unlike many other signal providers, so you can rest assured that trading signals are compliant-friendly, and there is no manipulation on part of the brokerages offering you the AnalysisIQ / Signal Centre Tool.
You can totally rely on the experts behind the Signal Centre Tool, since they have to stay unbiased and conform to the FCA’s strict regulations and criteria. Signal Centre will never produce a confusing or misleading signal, all the suggestions are equipped by a detailed description of the trading idea.
Ask your broker if they are offering Acuity’s AnalysisIQ / Signal Centre Tool. Note that Signal Centre can be embedded in MT4/5 trading platform as an Expert Advisor (EA).