Is Algo Trading Legit?

Created at 15 Nov 2023, 10:36
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Spotware

Joined 23.09.2013

Is Algo Trading Legit?
15 Nov 2023, 10:36


Is Algo Trading Legit?

In general, algo trading is legit but if this is a trading style you want to resort to, there are quite a few nuances to consider. What are they? Let’s explore that in detail!

Is Algo Trading Legal? 

Algo trading may or may not be your solution of choice but one thing is for sure: it is 100% legal. When we look back on the history of trading, it is worth remembering that it began in coffee shops and grew to exchange trading pits, with both eventually becoming obsolete with the rise of the electronic network. The same goes for algo trading. It is the same trading, just made more efficient with the evolution of technology and computing.

Just like with manual trading, the success of algorithmic trading is all about having a good strategy. This is where it all begins. Whether your strategy is written down on a piece of paper that you refer to as you sit in front of your laptop with a cup of coffee, or written in programming language and automated, it still begins and ends with you and is fully legal. There are no laws or rules that can prohibit algo trading but you should make sure your strategy does not break your broker’s rules or abuse the weaknesses of their trading system.

 Is Algo Trading Reliable?

When done right, algo trading can indeed end up more legit and reliable than manual trading. How so? Trading robots are quick on execution, free of human emotions, whether fear of loss or fear of missing out, they function flawlessly 24/7, have no possibility of human error, and do not sway from the trading strategy assigned to them based on market ups and downs, which many manual traders fall victim to. Additionally, they can be backtested on historical data to improve your trading strategies risk-free before launch.

When it comes to algo trading on the cTrader platform, for example, reliability is further increased with extra-rigorous backtesting and fault tolerance. In order to make sure your robot is reliable and efficient, you can backtest it on historical time periods and optimise its settings. All you have to do is launch your trading robot on some time period in the past, observe its performance and adjust the settings accordingly. And if you want to look back on what’s been done and base your new bots on that? The entire detailed history of backtesting is available with precise information, from entry and close time and price to net and gross profit, volume and direction of each deal.

The fault tolerance feature, in turn, ensures that cBots continue to run even if an unhandled exception occurs. If a cBot process crashes, it will automatically be restarted by cTrader, so you don’t need to keep an eye on your robots all the time. Additionally, cBots can be run in an external process separately from the cTrader application in order to ensure that other bots and programme applications do not interfere with their functioning. Then there is the added perk of each and every robot being launched in the Chromium Security Sandbox, which ensures the safe launch of third-party robots by preventing them from accessing confidential information or making persistent changes to your device. 

Do Brokers Support Algo Trading?

This one is up to the broker. In our opinion, a broker who has traders’ interests at heart wants its users to have all the opportunities available to them because at the end of the day, everyone has their own trading style and their favourite trading tools. The best solution is therefore to offer all possible trading methods for users, including manual, copy and algorithmic trading, e.g. with the cTrader trading platform. Many brokers do this. Others, in turn, provide an API specific for algo trading. Some brokers, however, are wary of algo trading, and the reasons can be many.

Fear of Arbitrage

Arbitrage trading is based on tracking exchange rate discrepancies between the broker and the market, so logically it is not in the broker’s interest to provide these opportunities, which are simply easier to discover with an automated trading bot scanning the market every millisecond of every day than with a human trader.

Heavy Load on Server

A trading bot can execute hundreds and thousands of trading transactions on a daily basis. Certainly way more orders than any manual trader is able to place. Some broker servers are simply not technically able to successfully manage such a huge load.

Overly Large Trading Volume 

While some brokers have technologies that enable them to handle the large trading volume that results from automated trading, this does not necessarily apply to all broker companies.

Trading Platforms with Built-in Algo 

Only a few platforms out there have built-in algo functionality and cTrader is one of them. It is an all-inclusive trading platform with manual, copy and automated trading. Designed with utmost productivity and efficiency in mind, cTrader’s all-inclusive algorithmic trading solution seamlessly connects with manual trading and charting features.

So what can we conclude? Yes, algo trading is legit, legal and reliable if you apply a well-thought-out trading strategy and stick to good software, which allows your trading robots to work 24/7 to bring it to life. For example, cTrader developers constantly work towards making the cTrader Algo application more convenient and reliable with every new release. 

Find out more about forex algorithms:

Forum about algo trading

Investopedia

YouTube channel about algo trading in cTrader

Babypips

Telegram channel for cTrader users


 


@Spotware
Replies

ncel01
15 Nov 2023, 21:01

Can brokers track/sort traders by the number of requests sent to the server(s)?

Heavy Load on Server

A trading bot can execute hundreds and thousands of trading transactions on a daily basis. Certainly way more orders than any manual trader is able to place. Some broker servers are simply not technically able to successfully manage such a huge load.

Additionally, some brokers can be willing to get rid of clients (traders) that execute more requests than those (internally) set as maximum for their business.

@Spotware:
Can brokers track/sort traders by the number of requests sent to the server(s)?
Would be interesting to know if traders can rest assured that they will remain anonymous and not get (possibly) harmed based on this.

I believe this is a very legitimate question and of interest to all the algo traders in the community.

Note that my question has nothing to do with the rate limits set by Spotware:
https://help.ctrader.com/ctrader-automate/rate-limits/


@ncel01

PanagiotisCharalampous
16 Nov 2023, 07:49

Reply to: Is Algo Trading Legit?

Hi there,

Can brokers track/sort traders by the number of requests sent to the server(s)?

What kind of requests are you referring too? If you refer to order requests, then yes they are trackable.

Best regards,

Panagiotis


@PanagiotisCharalampous

ncel01
16 Nov 2023, 08:43

RE: Reply to: Is Algo Trading Legit?

PanagiotisCharalampous said: 

Hi there,

Can brokers track/sort traders by the number of requests sent to the server(s)?

What kind of requests are you referring too? If you refer to order requests, then yes they are trackable.

Best regards,

Panagiotis

Hi Panagiotis,

I mean any request that is sent to the server, to matter its purpose.

What do you exactly mean by order requests?
Are these the only requests that can be used by the brokers to track traders' requests activity/frequency?

Thank you.


@ncel01

PanagiotisCharalampous
16 Nov 2023, 09:24

RE: RE: Reply to: Is Algo Trading Legit?

ncel01 said: 

PanagiotisCharalampous said: 

Hi there,

Can brokers track/sort traders by the number of requests sent to the server(s)?

What kind of requests are you referring too? If you refer to order requests, then yes they are trackable.

Best regards,

Panagiotis

Hi Panagiotis,

I mean any request that is sent to the server, to matter its purpose.

What do you exactly mean by order requests?
Are these the only requests that can be used by the brokers to track traders' requests activity/frequency?

Thank you.

 

Hi ncel01,

Brokers can track orders sent the server. They cannot track other requests e.g. for historical information or heartbeats, as this info is not relevant to them.

Best regards,


@PanagiotisCharalampous

ncel01
16 Nov 2023, 10:55

RE: RE: RE: Reply to: Is Algo Trading Legit?

PanagiotisCharalampous said: 

ncel01 said: 

PanagiotisCharalampous said: 

Hi there,

Can brokers track/sort traders by the number of requests sent to the server(s)?

What kind of requests are you referring too? If you refer to order requests, then yes they are trackable.

Best regards,

Panagiotis

Hi Panagiotis,

I mean any request that is sent to the server, to matter its purpose.

What do you exactly mean by order requests?
Are these the only requests that can be used by the brokers to track traders' requests activity/frequency?

Thank you.

 

Hi ncel01,

Brokers can track orders sent the server. They cannot track other requests e.g. for historical information or heartbeats, as this info is not relevant to them.

Best regards,

Panagiotis,

Thanks for informing.

In this case I believe that traders must be extra careful, given the reasons already mentioned.


@ncel01