Automated tradingUpdated 3 min readBy the FXNOD team
What is automated trading and how does it work?
Automated trading is trading done by a program instead of by hand. You write the rules once: what to buy, when to enter, how much to stake and when to stop. The program, usually called a trading bot, watches the market and places every trade that matches those rules. It removes hesitation and fatigue. It does not remove risk.
The four decisions every bot makes
Strip away the branding and every trading bot, simple or sophisticated, answers the same four questions on a loop.
| Decision | What it means | Example |
|---|---|---|
| What to trade | The market and the contract | Rise/Fall on a volatility index, five ticks long |
| When to enter | The signal that triggers a trade | After three ticks in the same direction |
| How much to stake | The size of each trade and how it changes | The same stake every time |
| When to stop | The limits that end the session | Stop at a loss of 20 or a profit of 10 |
Beginners spend nearly all their attention on the second row. Experienced traders spend it on the third and fourth, because those two decide how long the account survives.
How the loop runs
Read the market
The bot receives each new price, called a tick, or each new candle.
Check the entry rule
If the rule is not met, it waits. Waiting is a normal state for a bot, not a fault.
Check the limits
Before any order, a well-built bot checks the stop loss, the profit target and the stake ceiling.
Place the order
It sends the trade to the broker through the broker's API and records the result when the contract settles.
Repeat
The result feeds the next stake and the running profit or loss, and the loop starts again.
Where a bot runs matters
Some bots run inside your browser tab. Close the tab, lose the connection or let the laptop sleep, and the bot stops, sometimes with a trade still open and no stop loss watching it. Other bots run on a server and keep working with your device switched off. FXNOD's bots are the second kind: a bot started in Bot Forge or Auto Hub runs on FXNOD's servers, and its limits are checked there before every trade.
What automation is good at, and what it is not
- Good at: following a rule exactly, every time, at any hour, without fear after a loss or greed after a win.
- Good at: speed. Contracts that last a few ticks are hard to trade consistently by hand.
- Not good at: knowing that the rule has stopped working. A bot applies a losing rule as faithfully as a winning one.
- Not good at: creating an edge. If the strategy has no advantage, automating it only loses faster.
Who it suits
Automated trading suits someone who can describe their strategy as rules with no judgment calls in them, and who is prepared to test those rules on a demo account before funding them. If you cannot yet say exactly when you would enter and exit, trade by hand on demo first until you can.
Questions people ask
- Is automated trading legal?
- Using a bot on your own account is permitted by many brokers, including Deriv, which provides an API for it. The rules depend on your broker and your country, so check both before you trade.
- Do I need to know how to code?
- Not any more. Visual and question-based builders let you set the rules without writing code. Coding helps only when you want logic no builder offers.
- Is automated trading profitable?
- It is exactly as profitable as the strategy being automated. A bot adds discipline and speed. It adds no edge of its own, and most strategies that look good over twenty trades fail over two thousand.
- Is a trading bot the same as an AI?
- Usually not. Most trading bots follow fixed rules a person wrote. They do not learn or predict. Treat any product that claims an AI predicts the market with suspicion.
Run a bot that keeps its limits
FXNOD's bots run on its servers and will not start without a stop loss, so your limits hold when your device is off. Build one in Bot Forge or start a ready-made one in Auto Hub, on your Deriv demo account first.
Get started