Trading in the 21st century has been completely revamped by trading bots. In the highly volatile DeFi space, they take advantage of profitable price movements with speeds no human trader can match.
And they’re rising in popularity in the centralized world, with the forex and stock markets taking the lead. With 78% of stock trades being performed by trading bots, you should consider switching to an automated trading system if you want to catch up.
In this article, we’ll be taking a look at these two kinds of trading bots, exploring how they work and how to pick the best ones. Let’s dive in.
What Are Stock Trading Bots?
Stock trading bots are automated trading programs that buy and sell stocks on your behalf with the aim of making profits. They are advanced virtual robots that automate the stock trading process using specific algorithms. These algorithms are code-based instructions that tell the bots when to buy and sell.
Stock trading bots are also called automated trading systems or algo trading bots. Depending on the bot provider, these bots can support a wide range of stocks ranging from blue chip stocks like Alphabet and Microsoft to penny stocks like those on the iShares Micro-Cap ETF.
The main benefit of stock trading bots is that they automate the trading process, helping you make the most from price movements without being on your PC. They also reduce or eliminate emotions such as fear, greed, and overconfidence from your trades.
Furthermore, they can enter setups faster than human traders, enabling you to take advantage of profitable opportunities quickly.
However, they also have a few setbacks. Most stock trading bots require your PC or device to run continuously to operate. They can also become overoptimized for a specific strategy and fail under real-market conditions. And, of course, there are a lot of trading scams in the market today.
Still, if you can avoid the risks, investing in stock trading bots can be an excellent passive profit-making decision.
There are three main categories of stock trading bots. These are copy-trading bots, algorithmic trading bots and indicator trading bots. Let’s discuss how they work below.
How Do Stock Trading Bots Work?
The typical stock trading bot uses a predefined algorithm to identify profitable buy and sell opportunities. Depending on the type you use, this algorithm can either be basic and require manual strategy input or run on advanced AI systems that automatically predict and execute profitable trades.
That said, stock trading bots are broadly categorized into three groups. Let’s explain how they work.
Copy trading bots
Copy trading bots are designed specifically for copy trading. They require you to input trading parameters to execute trades.
So, this kind of trading bot is usually paired with proper signals from experienced traders or even AI signals. It’s an excellent option for both experienced and inexperienced traders, as it allows the former to leverage their trading expertise with automation, and helps newbies build their confidence.
Algorithmic trading bots
Algorithmic trading bots are also called algo trading bots. These stock trading bots follow algorithmic programs to execute trades, buying and selling only when certain conditions are met. They allow for zero emotions and tend to be very profitable in non-volatile markets.
Indicator trading bots
Bots like these use specific trading indicators to analyze the stocks market for opportunities to buy and sell in order to make profits. They use a combination of fundamental analysis and technical indicators to determine if specific stocks can yield profits if bought.
These indicators can be MACDs, RSIs, or Bollinger Bands, among others.
What Are Forex Trading Bots
Forex trading bots are very similar to stock trading bots. They use preprogrammed algorithms to generate signals and execute trades automatically on the foreign exchange market.
While this kind of trading bots are typically used for spot trading, they can also perform futures and derivatives trading, among other trading styles. Forex trading bots use predefined strategies to analyze the best times to buy and sell foreign currency pairs to make profits.
Although some forex trading bots come as software programs, most of them are script-based and require decent programming experience to operate and customize. Their advantages are the same as stock trading bots. They allow for emotionless trading, higher speed, efficiency, and round-the-clock trading.
How Do Forex Trading Bots Work?
Basically, forex trading bots use algorithms to predict when a currency’s price will rise or drop. They then place buy and sell orders on your behalf, generating profits if the trade goes as forecasted.
Some bots require you to input the specific conditions you want it to trade with. Others come with preprogrammed strategies and provide signals for you to confirm before you trade with them.
Generally, how sophisticated these bots are depends on the level of programming they’re designed with. And the programs for each trading style are different.
It’s important to note that human discretion is incredibly important in forex trading. But so is speed, which is why forex trading bots exist: to enable you to execute buy and sell orders when you physically can’t.
How To Select A Trading Bot
How to select step-by-step trading bots:
- Define your trading goals
- Check for asset and market compatibility
- Assess the complexity level
- Consider the bot’s UI and features
- Consider your budget
Here are some factors you should bear in mind before selecting a trading bot.
1. Define your trading goals
Your trading style will determine the kind of bot you’ll select. Do you day trade or prefer futures trading or you’re a position trader? Ensure to pick a bot that matches your trading style.
2. Check for asset and market compatibility
Is the trading bot you have in mind optimized for your forex or stock trading platform? Check whether it supports the specific trading pairs and stocks you plan to trade. It’s best to also consider the regulations regarding trading bots, especially in the stock market.
3. Assess the complexity level
Bots that require reasonable level programming knowledge to use are more adapted for advanced strategies. So, if you’re a newbie, go for those with drag-and-drop features.
4. Consider the bot’s UI and features
Even if you’re an expert trader, a bot with a difficult user interface will stress you out. So, make sure to pick one that’s easy to navigate and has the features that you need. Avoid bots that don’t support backtesting and paper trading.
5. Consider your budget
Make sure to pick a bot whose pricing range is within your budget. You can start with its free plan, if it has one, and upgrade when you start making profits.
Top 3 Stock Trading Bots
Here are three forex trading bots that we highly recommend
- Trade Ideas
- Stock Hero
1. Trade Ideas
Trade Ideas is an AI-powered platform that helps traders get the best trading features at reasonable prices. It offers real-time market scanning, AI-driven trade signals, customizable alerts, advanced charting capabilities, and time-saving data visualization.
Currently, it mainly focuses on American and Canadian stocks, and charts only work from 7:00 am, which can be a problem for premarket traders. But if these aren’t a problem for you, then consider its subscription plans, which begin at $84/month.
2. Stock Hero
Stock Hero is another great trading bots platform, offering standard bot trading features, backtesting, and paper trading functions. It’s also very beginner-friendly, as it’s a no-code trading bot that allows you to copy trade or input your own trading specifications.
It also comes with many preprogrammed indicators you can pick from and implement in your trading strategy. It has a three-tiered monthly pricing system ranging from $4.99 to $99.99.
Tickeron is also another great stock trading bot platform we highly recommend. It’s an all-round trading solution that offers trading bots for stocks, forex, and crypto markets. These bots are well-equipped with AI-enabled price prediction that enables them to provide accurate signals.
Although it has a free plan, it’s subscription packages range from $100 to $210 per month.
Top 3 Forex Trading Bots
These are our top three forex trading bot recommendations.
- GPS Forex Bot
- Forex Gump
- 1000pip Climber System
1. GPS Forex Bot
At the top of our list is the GPS Forex Bot, which is an expert advisor that recommends trades for forex traders. It utilizes advanced programming technology, and was developed by forex trading expert Mark Larsen.
It’s compatible with several trading platforms such as Meta Trader 4, and it allows for a lot of customization. However, its customer support isn’t stellar, so you may have trouble getting help if you have issues. The bot costs a one-off fee of $149.
2. Forex Gump
Like the GPS Forex bot, Forex Gump is also an expert advisor. It analyzes foreign currencies to find profitable trading opportunities and executes trades based on its built-in trading strategy. It’s compatible with MT4 and MT5, supports up to 25 currency trading pairs and is customizable to a reasonable extent.
Forex Gump EA is available as a one-time purchase software and currently costs €199 for the basic version.
3. 1000pip Climber System
This trading bot has become a trader favorite for its newbie-friendly design and advanced algorithm. The 1000pip Climber System bot supports a wide range of currency pairs and is compatible with Meta Trader 4.
It stands out from the other options here with its 24/7 support and ease of use and is currently priced at $299 for lifetime use.
Automating your forex and stock trading process is a great way to stay on top of the market. In this article, we’ve explored forex and stock trading bots, how they work, and how to select the best ones. These tips, if followed properly, could dramatically boost your trading portfolio, regardless of the market you trade in.
Are forex bots worth it?
If you want 24/7 trading, forex bots are worth it. And they tend to perform even better when using them as an experienced trader, or as a newbie doing copy trading.
Are stock trading bots profitable?
With the right strategy and favorable market conditions, stock trading bots are profitable. Still,
it’s best to be aware of the risks associated with bot trading and also the regulations around automated stock trading.
How to code a forex trading bot?
To code a forex trading bot, you must have programming experience and know how to use MetaTrader’s custom scripting language, MQL. Once you define your trading strategy, you can then write the code for your bot and launch it on the MT software of your choice.