Stock market trading is an ancient business, which hasn’t changed much over the past few decades. According to Statista, in 2021, stock markets in the United States accounted for nearly 56 percent of world stocks.
However, today’s technology and social media influence is not a sustainable modus operandi for traders. That’s why understanding how auto trading works and how it can help is key in navigating the modern market.
Many traders have been switching from trading manually to using bots. For example, you can run strategies that scan the stocks that meet your conditions and automatically execute a trade on your behalf.
You can also modify or configure those strategies to suit your preference with just one click. The following article will explain how to use bots for trading stocks.
What are Bots?
Bots are software applications that can do automated tasks over the internet. Bots are also referred to as ‘chatbots’ when interacting with users in an online chat room or through messaging apps.
The first-ever bot, ELIZA, was developed by Joseph Weizenbaum in 1966, and it could be used for role-playing conversations.
Today, many bots can be customized for trading strategies.
If you’re looking to run strategies automatically on your behalf, buy a pre-made bot or build one yourself. Coders and developers have built advanced bots that can do challenging tasks like trade stocks on track with certain conditions. For example, you can set up a bot that will trigger if the price of gold indicates an upward trend.
What are Trading Bots?
So, how does auto trading works?
Trading bots or sometimes referred to as algorithmic trading is a method of executing a large order (too big for an average person to do) at once without affecting the market price. This technique has been used extensively in stock market trading.
The concept of algorithmic trading gained popularity due to the evolution of high-frequency trading (HFT). With it, traders can buy or sell stocks in fractions of a second with the help of multiple advanced mathematical models and fast computer processors.
How to Run Trading Strategies Automatically With Bots?
Bots can do that for you when it comes to running trading strategies. However, you need a good plan first. Here are different methods to run processes automatically:
1) Use a Pre-made Trading Bot for Auto Trading
Pre-made bots can be customized and configured in one click, and you need to add the strategy and configure it. The bot runs on complete autopilot and alerts you about any unusual activity or changes to your favorite investment strategies.
You can use a pre-made bot to start trading.
2) Build Your Trading Bot
Building your trading bot is very much like creating an app or game. You need to set up the rules and every step the bot will take by your desired strategies. Here are some examples of bots you can build:
– You can build a bot to scan your social media accounts or particular sites for specific trading signals. You can set up the bot to read the news and find out any suitable opportunities for you, so it will automatically execute trades on your behalf after approval from you.
– If you have a favorite trading strategy, you could also build a bot to execute trades according to your system.
3) Use Auto-Trading Bots
Auto trading bots can be programmed to do everything mentioned in the previous section, but they do it on complete autopilot. You need to set up the rules and give them your preferred strategies. You can either buy an existing bot or build one yourself.
How Can Auto-Trading Bots Help?
1) Research and Monitor the Market
Traders can use bots to do some of their busy work like scanning for new trends, gathering trading signals, and staying updated on the latest economic news. So instead of wasting your time on things you can automate, you can focus more on what matters which is making money.
2) Save Money by Eliminating Fees
As a trader, it’s crucial to have an excellent day-to-day trading strategy. Sometimes it can be hard to stick to your usual routine if you’re working on a tight budget. With the help of bots, traders can automate their daily actions and save up on some money from commissions they would otherwise spend when executing manual trades.
3) Diversifying Your Investment Portfolio
Traders can build or buy their bots to research the market, gather trading signals, and diversify their investment portfolios. So instead of investing yourself, you can let your bot do all the work for you. For example, a trader could use technical analysis by buying a trading bot capable of reading candlestick charts and making the most out of it.
4) Catch Trades At The Lowest Possible Point
Traders can use bots to get a better view of the market by scanning various crypto exchanges for more opportunities or executing trades at the lowest possible point.
Interesting Related Article: “How to Use Crypto Trading Bots“