Algo trading on Forex, crypto-exchanges and stock markets: features, pros, cons

In recent decades, the trend ways of speculative operations on stock exchanges, as well as the Forex market, have changed significantly. This is largely due to the emergence of algorithmic trading – algorithmic trading.

All software methods of automatic conclusion of transactions (opening / closing orders) are easily ahead of human decisions. Trading robots are fast, emotionless, do not require rest and clearly implement a profitable trading strategy if the algorithm settings are executed correctly.

With the advent of cryptocurrency exchanges, effective algorithmic trading instantly switched to this relatively new type of speculation. In cryptocurrency trading, robots are especially actively used, since it is virtually impossible for a person to compete with them.

Let’s consider the essence of algorithmic trading (algorithmic trading). Let’s study its features that allow us to successfully use trading robots on Forex, stock markets and cryptocurrency exchanges.

Algorithmic trading – what is it

Translating the English term Algorithmic trading, every person who has experience in stock trading and transactions with classical financial instruments will see two concepts.

1. Modern algorithmic trading is a special automated system capable of opening or closing trade deals on its own. There is no need for the participation of a trader, since the program algorithm of the operation executes precisely according to the configured parameters.

2. Algorithmic trading method – performing a large operation (a large amount of funds) on an exchange floor through its fragmentation for the gradual implementation of a planned transaction. The robot, acting according to the specified rules, gradually opens small orders, creating the required trading volume in total.

The first moment demonstrates the importance of trading algorithms for making money directly on crypto-exchanges, Forex or the stock market. By means of the automatically carried out analysis of quotes, trend, optimal entry points, they can open positions that a trader needs.

These programs are also referred to as “trading advisors”, “trading robots”, “bots” or “trading algorithms”. Forex speculators often use the first term. Investors or traders of the cryptocurrency market are more fond of calling automated trading using the word “robot” or “bot”.

The second concept reveals the essence of algorithmic trading. That is, software algorithms in trading exchange instruments make it easier for speculators to work, because intense attention and manual labor is extremely tedious here. Algorithmic trading brings special efficiency to traders of investment funds, where in fact, very large transactions are always made.

Such operations often require stealth, and robots do it successfully. For example, the task of purchasing 100,000 shares belonging to a company cannot be fulfilled with one or two or three lots.

The trading algorithm here will successfully break this deal into thousands of small orders and quickly implement them, without attracting attention in the order book or the tape.

Benefits of algorithmic trading

It is advisable to consider the advantages of trading robots on Forex, bots on cryptocurrency exchanges and trading advisors on stock markets, not by a simple transfer.

Contrasted with traditional manual asset trading will provide indicative information. Consequently, the disadvantages of human decisions will represent the advantages of algorithmic trading.

So, here is a list of the disadvantages of manual trading:

  • there is no specific knowledge and there is no competent understanding of market nuances. This relevance is typical for novice speculators, but not for experienced specialists who consistently trade in a plus. Almost 94.7% of newcomers who come to make money on Forex or dream of getting rich on a crypto exchange reset their trading accounts by performing transactions manually;
  • non-systemic decisions and psychology. People have an individual threshold of psych emotional stability, beyond which there is tilt, breakdown, gambling, broke-in, etc. Any type of trading is a psychologically costly activity with periods of emotional overstrain. Most people find it difficult to follow the rules of a trading strategy that gives a stable profit in Forex, stock markets and cryptocurrency exchanges. Any deviations are unacceptable, therefore manual trading often ends with a loss of money;
  • human physiological limits. Even the body of trained speculators will not allow to open positions, control trend reversals, study news, close deals in 7/24 mode (for Forex 5/24, stock markets 5/8). People inevitably need sleep, rest, distraction and relaxation;
  • effects of personality characteristics in manual trading. Thinking speculators will not come to financial markets without a trading strategy, money management system and certain rules for opening / closing positions. It is a complex of individual norms with personality traits. Cases are rare when different traders trade calmly, absolutely identical. Even one currency trading strategy (stock trading system, bitcoin speculation method, etc.) will be implemented by different people in their own way.

Here are the basic disadvantages of exchange trading with hands, which are unusual for robotic systems and are their advantages.

Trading algorithms have no breaks or physical limits, there are no emotions with personality traits. In algorithmic trading on Forex, crypto-exchanges and stock markets, everything is performed by robots according to programmed conditions, without any deviations.

Disadvantages of Algorithmic Trading in Financial Assets

Without emotion, endurance and absolute rigor are great, but besides these advantages, trading bots have disadvantages:

  • – bugs and errors in algorithms. The code of any advisor for algorithmic trading is a structure with hundreds of places where all kinds of errors can be. It is enough for the developer to insert a comma in the wrong place, make a typo in the encoding, make an imperceptible mistake, and that’s it! More often, robots function in such situations, but they make fatal mistakes that lead to the draining of trading deposits;
  • – the complexity of algorithmic trading systems. In addition to knowledge of programming languages and the nuances of compiling a code, developers of trading robots need to understand the basics of exchange business (minimum). The programming itself is not easy, and the introduction of correct actions into the “behavior” of the robot creates enormous difficulties that require significant experience;
  • – minimum information base. It is impossible to teach bots for algorithmic trading any secrets, situational decisions, reacting in specific situations, new strategies from video courses, and many others. others. The program includes only traditional rules and basic schemes of actions;
  • – no situational flexibility. Trading robots in stock markets, Forex or cryptocurrency exchanges do not allow adaptation or correction. An executor of manual trading is able to adapt to current market changes – price extremes, volatility of quotes, flat, trend reversals, candlestick patterns, etc. In algotrading, only global reconfigurations of a trading robot are possible, and its quick reactions are impossible outside the embedded algorithm. Also, bots cannot adapt without restructuring the software scheme of work.

It turns out that algorithmic trading robots have a number of problems, which, by the way, are less significant than shortcomings in manual trading. Human errors and behaviors shape the majority of financial market failures.

But it is impossible to completely denigrate manual trading in financial instruments, because the incorrect use of trading bots or their mistakes also have fatal consequences.


Now the question about algorithmic trading on stock exchanges will not cause bewilderment or surprise. Any type of algorithmic trading is a trading option where software algorithms are used to open / close deals. Smart use is effective in every modern financial asset market – stock trading platforms, cryptocurrency exchanges, Forex, fixed-term contracts, etc.

The main purpose of the best trading bots is to effectively solve at least 3 tasks:

  1. increase the profitability of trading;
  2. minimization of manual workload in large transactions;
  3. organization of non-stop trading, when the most profitable points of entry into the markets are selected.

There are many models of settings and trading strategies for algorithmic trading robots. For example, pair trading and arbitrage provide remarkable profitability. A reasonable setting of the bot parameters is always required when understanding the nuances of exchange speculations, knowledge of specific situations and an objective assessment of the capabilities of the algorithm used.

Algo trading can be an effective way to make money on Forex, cryptocurrency exchanges and stock markets. Bot trading is available on major financial platforms.

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