A binary options trading robot, also known as binary options trading bot, is a piece of software programmed to carry out binary options trading based on set parameters. Binary options trading robots can be integrated with online trading platforms and deployed at will, making it unnecessary for the human trader to stay glued to the screen.
A trading robot can be active 24/7 without rest, and many human traders also like how using a robot takes some of the emotional components out of the trading decisions. A trading robot will not make mistakes because it is tired or gives in to panic.
Trading robots are often connected to a signal service provider, who will send it alerts when suitable market conditions appear. The signals are usually derived through the use of algorithms.
Can a trading robot be used to trade binary options?
Yes, there are trading robots that are capable of this.
What does it cost to buy a trading robot?
That is a little bit like asking what a shoe costs. There are shoes available at for a few bucks and there are shoes that costs thousands of dollars. At the time of writing, you can get started with the well-known 1000pip Climber System for roughly 100 USD, while the likewise well known GPS Forex Robot (for forex trading, not specialized in binary options) costs around 150 USD. When you start looking around, you will find robots that are both less expensive and more expensive than these. You will also find robots that you rent rather than buy; typically monthly or yearly.
Building a trading robot
You can build your own trading robot if you are willing and able to put in the time and effort to learn how to do it. Among hobby traders, a common way is to open an account with one of the many brokers that will give you access to a MetaTrader platform. On the the platform, you use MQL to program trading robots. The MetaTrader platform is also good for testing out the robot using play-money to iron out the kinks and spot vulnerabilities.
Among algorithmic traders, C++ is a popular programming language since it is good at handling big data volumes in an efficient manner. Python is more popular among beginners, as it is considered less difficult to learn than C++.
Beware of scams and over-promising robot vendors.
Automated trading robots for binary options trading are available for sale online. Be careful and make sure you carry out an informed purchase decision. Regrettably, there are many low-quality robots and outright scams lurking in this field, and some sellers of binary options trading robots will cherry-pick data for their marketing to make the robot seem more successful.
Some disreputable vendors oversell their trading robots with claims such as “risk-free trading” and “profits guaranteed”. There is also the popular “your money back in 30 days if you don´t like our product”. It sounds appealing, but actually getting your money back from an offshore company that popped up online, quickly sold a bunch of robots and then disappeared again will prove very difficult.
There are good binary options trading robots out there, but they can not guarantee profits. Just as with other forms of speculation, your money will be at risk. If someone claims that this is not the case, they are most likely not being honest or they are naïve software sellers who believe the bullshit they have been fed.
If someone had developed a binary options trading robot that actually provided risk-free profits, they would not want, nor need, to sell it to hobby traders online to quickly earn a few bucks.
It is also good to remind ourselves that the advanced robots used by institutional investors are kept under lock and key and protected as the valuable business secrets they are – and even those programs are not fault-proof, only pretty good.
Trading robots and latency
Trading robots are famous for offering quick and accurate order execution. Order placement is quick and always accurate (no room for human error) and can have a very beneficial impact on the bottom line for a binary options trader. As long as the latency is low, the chances are high that purchases and sales will happen at the desired levels. However, a lot of robot trading is simultaneously very sensitive to latency. The algorithm is calibrated for low latency, so if there is moderate latency, it might screw up the whole deal and you are left with a loss instead of a profit.
Black swan events
One of the advantages of trading robots is that they are not humans. They do not get tired, they do not get prideful or greedy, and they do not succumb to panic. The downside of not having a human placing the orders is that trading robots are (still) not good at handling so-called black swan events, i.e. something that is outside the norm. Algorithmic trading relies on historical market data and mathematical models to predict future market movements. When something happens that is not in line with historical data, it can be difficult for the robot to make the right (profitable) decisions. The lack of human judgment can be detrimental.
There is also a risk that we, the binary options traders, become too lazy and fail to develop. When we lean back and let the algos do the trading, we fail to hone our own skills. When a black swan event does happen, you might not be sharp enough to deal with it well, even if you have the opportunity to do so.
Understanding algorithmic trading
Since algorithmic trading is a key concept that ties heavily into robot trading, we recommend that you do not carry out any robot trading with binary options without first understanding the basics of algorithmic trading (also known as algo trading).
Algorithmic trading utilizes a computer program that follows pre-set rules – the algorithm – to place trade orders. The instructions take into account factors such as price, quantity and timing, and can also involve a mathematical model. Automated trading robots utilizing an algorithm can be very good at following strategies such as arbitrage and trend-following and executing trades based on trading volume (volume-weighted average price) or time-lapsed (time-weighted average price).
Algorithmic trading is very common today and has helped render markets more liquid. A wide range of institutional investors are relying on algorithmic trading, and algos are considered essential for index fund rebalancing.
Let us pretend that your trading strategy looks like this: You buy 100 shares of stock when the 50-day moving average goes above the 200-day moving average. You sell 100 shares of stock when the 50-day moving average goes below the 200-day moving average.
These basic instructions can be used to create an algorithmic and given as instructions for a trading robot. Instead of you monitoring the market, the software will take in market data. When the conditions for buying are met, it will place a buy order. When the conditions for selling are met, it will place a sell order.
Algorithmic trading is not just used for stocks these days – it is available for many different types off trading, including binary options trading.