How do trading bots work?

Most sophisticated trading bots work with 3 moving parts:

[signal generator] -> [risk allocation] -> [execution]

Signal Generator

This is where we make predictions. There will be some data that goes into the signal generator and a buy or sell signal pops out of the other side.

Risk Allocation

This takes the buy or sell signal then decides how much to buy. As in, should we allocate our entire capital to this trade or just a portion? Should we buy all in one go or should we average in?

So now we know the direction, we know how much we want to buy or sell, next is the part that actually executes the trade.

Execution

See, if you have a lot to buy in one go (say you have to buy $10,000,000 in total for 500 clients) then you probably don’t want to do this all in one trade as you’re unlikely to get a favourable price.

You ideally want to dribble your order into the market.

If you have the exact same bot as 1000 other people and you’re all running in disjoint instances (i.e. they don’t communicate with each other) then this is really going to give you unfavourable pricing.

All three parts, signal, risk, and execution, need their own distinct algorithms and optimisation processes applied. If you have a bot that fudges through any of these parts or worse, disregards them altogether, it won’t hold you in good stead for profitability.

How does BrozBot works?

BrozBot is the first automated crypto and forex trading tool that has been made to automate trading strategies.

The bot’s ability to trade through API keys from exchanges makes BrozBot one of the most reliable platforms because it cannot access or withdraw your money. Our bots can work at very high-speed with the ability to place up to 100 times more orders as compared with manual traders. It is active 24/7 and eliminates the emotional quotient from trading.

The cost is also very low. Anyone can get started with a Basic Plan of $19 per month. Try it now at brozbot.com.