Trading robot
Family V · Platforms
Not to be confused with trading desk, trading terminal, live trading account.
Trading robot (also called an expert advisor, algorithmic trading system, or automated strategy) is a program that connects to a trading platform or exchange and executes orders based on coded rules. It may run on a local computer, a virtual private server, or the broker's infrastructure. The term covers both simple rule-based scripts and complex machine-learning systems.
How a trading robot operates
A trading robot typically performs three functions: receiving market data, evaluating entry and exit conditions, and sending orders to the broker or exchange. It may also manage open positions, calculate position size, and apply stop-loss or take-profit levels. The robot's logic is fixed in code, though some systems allow parameter changes or adaptive learning.
Execution speed and reliability depend on the connection between the robot and the trading venue. Latency, API rate limits, and platform compatibility vary by provider and are not standardised.
Worked example: a simple moving-average crossover robot
Consider a robot that buys one standard lot of EUR/USD when the 50-period simple moving average (SMA) crosses above the 200-period SMA, and sells when the opposite crossover occurs. Assume the account currency is USD and the broker charges a commission of $5 per lot per side.
The robot executes this sequence automatically each time the crossover condition is met. Actual results depend on slippage, spread, and the broker's execution model.
Risks and limitations
A trading robot does not guarantee profits. It can malfunction due to coding errors, connectivity loss, or unexpected market events. Backtested performance often differs from live results because of factors such as liquidity, latency, and changing market conditions. Regulatory treatment of automated trading varies by jurisdiction; some authorities require registration or specific risk disclosures.
Often confused with
- trading desk
- A trading desk is an organisational unit within a financial firm where staff execute, monitor and manage orders and positions, either for the firm's own account or on behalf of clients.
- trading terminal
- A trading terminal is a software application that connects to one or more brokers or exchanges and lets a user submit, modify and monitor orders, positions and market data from a single interface.
- live trading account
- A live trading account is a real-money brokerage account through which orders are executed against actual market liquidity, with profits and losses settled in the account's base currency.