Why did binary options robots come about? Convenience is one of the big draws of binary options trading. Auto trading can take it a step further. With the right broker, binaries can offer an accessible method of putting your market knowledge to work.
But what if things could be made even more straightforward? How would you like to switch your entire trading activity to ‘auto-pilot’? A piece of software reads the signals for you; it decides whether, when and how to take a position – and all without you having to lift a finger: this is the essence of a binary options robot.
If all of this sounds a little too good to be true, you’re right to be sceptical. It’s common for traders to rely on automation to some degree – but that’s not the same as putting your entire strategy in the hands of a single algorithm.
To help you make up your own mind, we put binary options ‘bots’ under the spotlight…
A binary options robot is piece of software designed to identify and analyse market signals, pinpoint suitable trades and execute orders in the place of a human trader. Whether or not a trade is placed is all dependent upon whether the conditions meet the rules defined by the programmer; so the bot isn’t ‘intelligent’; it’s merely executing orders defined by its creator.
The rules stipulated by the creator are usually defined according to the backtesting approach; i.e. historical data is constantly reviewed and applied to try and ensure that the algorithm behind the software reflects the reality of the market.
Most robots are services to sign up for and use in conjunction with your trading platform. Some robots services will suggest particular brokers. The better services will generally not push clients to use a particular broker. Where clients are pushed down a specific route, it suggests the robot service or software is not very accurate – if it were, it would be able to operate independently of any single broker. Those tied in with certain firm are therefore likely to be inaccurate – or worse, simply a sign up ‘funnel’ for that broker.
When signing up with the robot service provider, you enter your details and select which broker you will be using. You choose which assets to trade, confirm how much you want to invest for each trade, the total amount of loss you can accept and the maximum number trades you wish the robot to execute in any one day. It’s then usually just a matter of clicking ‘Confirm’ to put the robot into action.
Like any tool, a binary options robot is only worth its salt if it offers real benefits. Does it make life easier? Can it make you more money? Here are some potential advantages…
Are robots infallible? Of course not. Bear in mind the following before considering basing your entire strategy around automated trading…
When looking at robots, be aware of taking success rates at face value. Be especially wary of service providers who give little or no information about the reasoning used in the program. Professional trading houses typically build their own automated trading systems – and these are complex, continually refined and closely guarded pieces of software. If someone is offering a robot – for free – while claiming that it is a commercial-grade tool, you may be right to conclude that those claims do not stack up.
A robot tool should give you the capacity to set certain parameters; the maximum level of loss you can sustain over any given period being one of the most important. But within these parameters, the software operates ‘blindly’, following the rules assigned to it at all times and without the ability to adapt to changes in circumstances.
As we all know, markets rarely behave entirely rationally or logically. Robots are programmed according to past performance data – and this in itself is no failsafe indicator of future performance. In real life, the climate could be changing significantly, but your robot may be carrying on regardless.
Trading signals are essentially trade recommendations, made either by ‘real people’ or generated through automated market analysis. Signals services and trading robots are often closely linked and appear similar. The big difference however, is that with a manual signal service, you receive the signal and it’s then up to you to actually execute the trade. Simply put, signal services advise you what to do, while robots make the trade for you.
In the broadest sense, if you receive market news alerts to your phone from your broker, or if you regularly tap into trading blogs and newsletters, you are relying on market signals. Picking up on what’s happening across the markets – and knowing how to interpret this information is all part and parcel of effective trading.
The MetaTrader platform is especially effective at enabling you to receive signals through its ‘Expert Advisor’ facility. Here, you can go so far as creating your own alerts system by setting the parameters to be followed by your very own Expert Advisor – or you can download a program from elsewhere and put it to work, simply by dragging and dropping it into the interface.
Especially when you are still finding your feet with binary options, an element of auto trading can be good for familiarising yourself with the market, helping you to become more adept at spotting trading opportunities.
Your main focus, however, should be on putting together a strategy that reflects your specific trading objectives and your attitude to risk. For this, you need a reputable, reliable brokerage service and access to up-to-date information from reliable sources.
You might conclude that automated execution of trades forms part of this (especially if you cannot always access a screen easily). But here, the emphasis should always be robots that help you to put your strategy to work; not one that overrides it.
Binary.com also deliver the ability to design and create an auto trading bot. Often referred to as the broker for advanced traders, Binary.com now provide a series of ‘advanced platforms’ – including the ‘Binary bot’ platform which provides the ‘tool set’ for users to create their own algorithm of auto-trade software.
So the platform enables self build auto trading tools, but – as is often the case with this brand, they again provide for the more advanced client. The tools and settings available, offer greater depth than at rival broker. This enables users to target more complex strategies. In turn, this can led to more accurate and specific trading.
Binary Bot fits in with the rest of the Binary.com look and feel. Some of the distracting elements of other platforms has been removed, and replaced with more depth and features – typical of the brand. Read more about the trading platform in the Binary.com review.
Daweda offer ATS (Automated Trading Software) to their clients. As Daweda operate an exchange, automation of trades via a robot can actually give traders an edge. They can get the price they set instantly, where a manual trader may miss the price they wanted.
The ATS service is a recent addition to the growing exchange platform, and shows the size and strength of the broker, that they are not prepared to take on over the counter brokers with their own robot service.