trading robots, good plan or scam?

Generate passive income on the stock market, without lifting a finger. This is the promise of trading robots, or Expert Advisors, computer programs configured to place orders on the financial markets without your intervention. Is the bet held? Decryption.

Times are changing. And the methods of trading with them. While orders were shouted before, now most of the operations are carried out without human intervention. The strength of the algorithms: their speed of execution. As soon as the market conditions match the indicated parameters (price, execution time, etc.), your orders are executed automatically. Well known to professionals, the automatic negotiation allows you to cut and open a multitude of positions in record time. The myth of Wolf of Wall Street, with orders passed by hand, it hardly exists anymore. Today: everything is automated, laughs Jol.

This MoneyVox player has been investing in the stock market for several years. In his early days, Jol lost as much money on the markets as he was making. I took some good shots, but I tended to give in to emotions, she remembers. I often cut my earnings too early and my losses too late. It is an instinctive reaction that can prove to be disabling for investors. To make matters worse, he doesn’t have time. Trading is a time-consuming business and I have a separate job, explains the budding trader.

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So when he hears about auto trading, Jol decides to take the plunge. But very quickly, he collides with a oversupply and of very heterogeneous quality. There are many bogus sites, which multiply false promises to deceive investors. I have lost my initial bet several times. And it took me nearly a year to come up with a serious solution, says Jol. A real obstacle course.

However, the game was worth it in his opinion. Eventually I found what I was looking for: a trading robot set up by a former IT engineer by training with more than 20 years of trading and financial markets experience, explains Jol. The trading robot takes the form of a algorithm which interfaces with the broker platform used by Jol. Once configured, it analyzes in real time the flows of the Euronext company – which manages the stock exchanges in Paris, Amsterdam, Brussels, Lisbon, Dublin and Oslo – and rises to 900 orders per year on the CAC40, DAX40 and S&P 500 indices. Result: an average gain of 15 30% per year, according to Jol, who however specifies that the solution is not magical and does not exclude the risk of loss.

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Scams, flash crashes … The units of automatic trading

That said, not all stories end so well. Robots, there are dozens of them, and all – far from it – are not a winning investment. In 20 years on the markets, I have been offered several automatic or semi-automatic trading robots, whether on currencies, indices or cryptocurrencies. A robot has never given me substantial results over time and no one has ever told me about a high performance robot for a long time. I would therefore tend to be extremely attentive to this type of offer, especially on social media, warns Nicolas Chron, an analyst at Market area.

First there are the scams, with those dubious sites promising investors guaranteed profits. A martingale that often leads savers to invest their savings on trading platforms. scam broker. Once your money is in your pocket, it disappears without a trace. Another widespread scam is that investors are offered a free trading robot if they deposit their funds with a specific broker. A promise that, even in this case, will never be kept, a goal of the scammer so simple to touch a commission referring new clients to the broker. Several brokers have already been pinged and appear on blacklist regularly updated by the Financial Markets Authority (AMF) and the Prudential and Resolution Supervisory Authority (ACPR).

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But beyond the pitfalls and false promises, Alexandre de Ravel, independent trader and trainer, wonders about the seriousness of the approach. Basically, programming software was created to do backtesting, i.e. calculate the effectiveness of a strategy in the past if it had been applied previously. Unfortunately some people today use this type of software to generate automatic positions on future positionseven though it wasn’t created for that at all, the young man explains on his Youtube channel.

Another point of attention: banks and investment funds are able to obtain results with automatic trading, but we are talking about players who dedicate tens or even hundreds of thousands of dollars to the creation and above all to the setting robot. Sometimes it takes several years to make them profitable, knowing the market meanwhile flies and that it is therefore necessary to incur additional expenses to update the robot. And even then, success is not guaranteed. The trading software only automates one trading strategy Manual. If the strategy is bad, the robot’s performance will also be bad.

Worse: a configuration error can have dramatic consequences if the robot is left unattended, even for professional traders. On May 6, 2010, a misconfigured algorithmic trading program placed a sell order in the amount of 4.1 billion dollars, regardless of the price or execution time of the trade. Within 10 minutes the Dow Jones almost lost 10%. Never has a decline been so rapid: we are talking flash crash.

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Social trading: reconciling man and machine

Between uncertain promises and very real risks, should trading robots be scrapped? Some actors, image of the broker eToro, are exploring a third way: the social commerce. In this case, the machine does not just execute a previously defined strategy. She reproduced the positions of other traders on the platform.

Investors can simply choose the user they want to copy, enter the amount you wish to allocate and the user’s positions will be automatically duplicated in real time and in proportion to the amount invested, explains Emmanuel Sackmann, French-speaking regional director of eToro. This feature allows investors beginners who learn the basics of this practice and users who don’t have enough time constantly monitor the markets, automatically copy the best performing investors.

Something to seduce novices. But even here prudence remains a must: whether it is a robot or a human being at the origin of the professions, the gains are not. never guaranteed. And the prospect of making an easy profit shouldn’t overshadow the risk capital loss.

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