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How to Use A Software Bot While Trading

The main components of a trading bot like FinTech Ltd are entry rules that send signals for buying and selling, exit rules that indicate when to close the current position and sizing rules that determine the quantity to sell or buy. In this article, you will learn the basic methods of using a software bot while trading.

The basic tools

To use a software bot while trading, you need a computer and a stable net connection. You will also need a Windows or Mac operating system along with an electronic trading platform that can be sued for coding trading strategies.

Algorithmic trading strategies

Every algorithmic trading strategy that you employ must be sound and stable as far as its market and economic standpoint is concerned. In order to inform the design of your software bot, there are a number of strategies that you could take advantage of:

  • Macroeconomic news
  • Fundamental analysis
  • Analysis based on statistics
  • Trade infrastructure

Testing Your Software Bot

There are four steps involved in building and the final testing of your software bot. They are:

Basic research

This step involves acquiring a strategy that suits your personal requirements. You will have to keep in mind factors like the personal risk involved, the amount of time you can commit and the trading capital that you have. The next step is to identify the market inefficiencies. The final step is to code software bot to suit your preferences.

Backtesting

This is done to validate your trading bot and to find out if it can function the way you had originally planned it to.

Optimization

Once you have coded software bot that actually works, you will have to work at maximizing its performance and minimizing overfitting.

Execution

You can now use real money to trade with your trading bot. There are bound to be emotional ups and downs while trading for the first time but there will also be some unavoidable technical issues. The first thing will be to select an appropriate broker. You will also be faced with the management of both market risks and operational risks. This is an important stage that will help determine the performance of your software bot and decide if it is as effective as it claimed to be during the testing stage. For the best results, it is recommended that you monitor your software bot consistently to find out if it is handling market conditions efficiently or not.