Trading binary options can be an amazingly lucrative profession, but it is not an easy one by any means. Yes, it is easy to learn how to click “High” or “Low” on your platform, but learning how to do it profitably is considerably more challenging. Once you start to see the hard road ahead of you, you may feel tempted to invest in a binary options trading robot, also called a “bot” or an auto-trading program.
What is a trading robot? It is a program which places trades for you. A bot is not quite the same thing as a signal service, though the two overlap. If you subscribe to signals and you are not using a trading robot, the signals will simply be sent to you via text message or email, and you can choose whether or not to act on them.
A robot trader is fully automated. The robot generates the signal and places the trade for you. In theory, that means you do not have to be anywhere near your computer to trade. You can just go about your day. Head to the office or to the beach—it is up to you. The robot does all the hard work. You just kick back and reap the rewards.
Of course, it is not really that simple.
No signal service is perfect, and no trading robot is infallible. In fact, I would assert that there are no long-term successful traders who are relying only a machine to make them money. The evidence of that is all around. If it really were that easy to make money, why would anyone actually go through all the hard and tedious work of learning how to trade manually?
I do not want to simply tell you, “Do not use trading robots,” however. I want to instead take a closer look at this issue. Trading robots are not entirely useless, and may actually function as valuable tools in your trading toolbox. But that is only true if you use them properly and you understand their advantages and disadvantages.
Can a robot really trade better than a human being? Does a human being really have the advantage on the robot every time? There are proponents on both sides of this argument. But let’s break it down and see if we can get a more comprehensive view of the issue.
Advantages of Trading Robots:
- You do not have to sit in front of your computer. This is obviously huge. You get to walk off and do something else. Whether you are lazy or simply overcommitted in your schedule, this can be a huge boon. The trading robot has no other priorities, no other obligations, and no need for balance in its life. It can commit 100% to trading.
- The trading robot is fast. There are no delays from the time the signal is generated to the moment the robot takes the trade. The robot will push the right button at exactly the moment it means to. That means your order will be filled at the proper price, and you will maximize your profits.
- Robots do not have trading emotions. Emotions can be quite destructive when they swing out of control, and many traders struggle to execute their trades properly because they cannot handle their own fear, anger, or overconfidence. The trading robot does not suffer from these psychological complications and setbacks. It makes the “rational” decision every time.
- The auto-trading program is capable of monitoring, analyzing, and trading a vast number of assets on many different timeframes, depending on the system it has been programmed with. You may only be able to handle several asserts or juggle a couple of timeframes. The auto-trading program might trade currencies, stocks, commodities, and indices. Some trades may last 30 seconds, others 30 days.
- Assuming you buy a good program which has been extensively tested, it should have solid, reliable, predictable results, at least until it needs to be adjusted again.
- The auto-trading program may be better at taking in context than you are as a human trader. It may notice a shift that you would miss, and may actually in some situations be better at adapting than you would be. It can juggle a lot of complex information which you would struggle to interpret.
Disadvantages of Trading Robots:
- Even though in some situations a trading robot may be more aware of context than you would be, in other situations the opposite happens. The bot may be unaware of a shift you would have identified with ease. This can result in short-term or long-term losses.
- This situation can become very bad if the robot’s creator is not closely monitoring it and actively making adjustments when necessary. A robot may work great for a few years and then fail all at once when a major change has taken place in the market that requires adaptation. Since it is not receiving a proper manual adjustment, it continues to trade poorly on your behalf, and you lose more and more money.
- When changes are made to the robot’s programming, you are not involved in those changes. You have no idea what is being done or why, or whether it will work, and sometimes it does not.
- The robot is unable to analyze and interpret economic news, which may sometimes be prohibitive in its performance.
- The robot does not actually learn. It is programmed to behave a certain way, so it does. But what it does not do is start building up a compendium of knowledge in its head, informing future decisions. It never becomes a market expert. It never develops or hones intuition. Even though you cannot make a living trading on instinct alone, instinct can inform profitable trading. The robot can only spot the patterns it has been told to look for. It cannot spot new patterns unless a human being teaches it to.
Advantages of Human Traders:
- If you are doing your own trading, you actually know what you are doing. You are not trading blind, like you would be with a robot. You know exactly what how your system works, and hopefully, why it works. Knowledge is power!
- Human traders can monitor economic news. While this is not necessary a must (or even useful for all traders), many traders find it beneficial or even foundational.
- If your system breaks, you can actually do something about it. A robot may just keep generating bad trades indefinitely. But you will be able to spot a malfunction right away and immediately begin testing adjustments to your system. Since you know how your system works and why, you should have the knowledge you need to start troubleshooting. This is something that is entirely out of your hands with a trading robot. If a robot breaks, you are stuck waiting on the development team to fix it. Meanwhile, your hands are tied.
- Unlike a robot, you have the ability to learn and grow as a trader and become a genuine expert in the markets. You can learn how to read the charts like a book, and develop the intuitive power to spot new patterns. Trading is all about pattern recognition.
- Human traders can rely on themselves! There is something to be said for the fact that trading is perhaps the most self-reliant career in the world. You are not depending on a boss, a customer, or anyone else to make you money. Why would you want to lean on a software program? When you learn how to trade, you liberate yourself from a system of dependency.
Disadvantages of Human Traders:
- As a human being, you are never going to be as fast as a trading robot. It can take time to spot setups, and by the time you do spot them, you may have already lost an opportunity. Or you might go to place your order, but the extra time you spend setting it up and clicking the mouse can result in slow execution, filling the order at a price you did not expect.
- You have a finite amount of time, energy, and mental resources to distribute. It can be hard to find the time you need to focus on your trading while also balancing other obligations. This can divide your attention and it can also slow down your progress toward your goals.
- You may be forced to a narrower focus than a trading robot. Most human traders simply are not going to be able to juggle all the assets and timeframes or even trading techniques that a robot might manage to work with. You may also have a hard time juggling all the information which is on your charts, and may have a hard time seeing the big picture that a robot can grasp with ease.
- It takes a lot longer for a human trader to run backtests than it does for a robot to do it. A robot can also run a lot more tests than you can.
- As a human being, you are hampered with emotions and may be tempted into emotional decision-making. You can and will deal with fear, frustration, impatience, anger, overconfidence, and a host of other emotions that can make it hard to trade intelligently.
- Unlike a robot, you also have physical needs to deal with. You can become tired, sick, or injured. When your physical health suffers, your trading can suffer too.
Trading Robots vs. Human Traders: Who Has the Ultimate Advantage?
As you can tell, the advantages of a human trader are essentially the disadvantages of a robot, and vice versa. The robot has powerful capabilities that you lack, but you also have abilities that a robot can never bring to the table. Despite this, I still feel an argument can be made that the human trader is always the winner.
I think there is one particular element of trading on your own that a robot can never provide you with, and that is control. As I mentioned previously, one of the unique and wonderful aspects of trading that makes it such a distinctively advantageous field is the fact that you are able to make a living relying on yourself. If you become good at what you do and you understand your own trading inside and out, you can achieve a level of sovereignty in your life which you are simply not going to find anywhere else.
When you hand control of your life over to someone else, you become disempowered. Traders who succeed are not relying on someone else to develop a system, keep it working, and trade on their behalves. They are doing the hard work themselves so that they can maintain control over their professional lives. They are empowering themselves by developing their own expertise—something they know they can depend on, now and in the future.
So Should You Use Trading Robots?
Whether or not you decide to use trading robots, I think it is a smart practice to do as much of your trading as you can yourself. If a robot helps you to save time, trade while you are at your day job, or spot entries you would have missed, by all means, consider mixing automation into your trading.
Be careful about doing it, though, because when you trade with the help of a robot, but still interject your own manual decisions, you could disrupt the profitability of the robot’s system or your own.
That is why I recommend testing whatever you plan to do before doing it live if possible! There are trading robots you can link to a demo account. Test your mixed strategies with virtual money before you trade live using real funds.
Also take great care when you are selecting signals or robots to trade with. When you are relying on someone else, even in part, to help you make money, you need to be able to trust the service you are purchasing completely! A good starting point in your selection process is to visit our Big List of trading robots and signal services. While we have not gone through and tested all of these services, we have manually gone over what they have to offer, looked up customer reviews, and compiled the results of our research.
Start there. When you find some services that interest you, make a list of programs to research in greater depth. Only after you have done your homework and feel fully confident should you purchase any auto-trading program. Demo first, and good luck!