Why is automated trading only just getting started?
The image of hundreds of traders shouting over each other during an ordinary trading day on Wall Street may be a bit outdated. Of course, hundreds, even thousands, of traders are still actively trading every day, but things are very different nowadays. Today we explain why this change has taken so long.
A significant shift has taken place, the change from physical trading to digital trading. For several decades, traders opened the vast majority of positions via digital systems. However, today this is still often done manually. And it is only recently that we see that traders are starting to use automated systems.
The only question is, why did this take so long? If the first computer was already developed in 1938 by the German physicist Konrad Zuse, why did it have to take so long before we let these computers take over our sometimes labor-intensive work?
If we go back in time when not everything was done digitally yet, you will see that everything actually happened very quickly. People saw computers first as something exclusive and alien, but now they are an integral part of their daily lives. Moore’s law can explain this growth and habituation. In 1965, one of the founders of chip manufacturer Intel, Gordon Moore, predicted the future of technology. He expected that the transistors in a chip, and with it the speed of this chip, would double every two years. The size of a chip would stay the same while the computational power increases at the same cost. This process is also known as scaling.
He based his prediction on his observations of the first few chips from his company Intel. The first chip had four components; a year later, there were already eight. Four years later, when there were sixty components on a chip of the same size, Moore finally dared to share his prediction with the world. The law stayed true for over 50 years. While giant computers used to have limited computing capabilities, we now have powerful computers in our pockets in the form of a smartphone. A chip used in an iPhone 6 contains exactly 2 billion transistors on the same surface that had only two transistors decades earlier.
In recent years, it has become apparent that Moore’s law can no longer hold as the scaling process has become more and more complex over the years. At the moment, a limit has been reached, which makes it very complicated to fit more transistors on the same sized chip. However, this development of the past 50 years has ensured that the current computational systems are very powerful and capable of many things. So the question that may arise in the traders’ mind is, what does this mean for automated trading?
What does this mean for trading bots?
The graph of Moore’s law shows very clearly that the technological revolution has gone very fast. But it also shows that this revolution took years to get started. This is because the first computers simply had very little computing power and were incapable of performing complex tasks. For example, performing a simple calculation was previously seen as a complicated job for a computer.
Trading with robots is done based on many different factors. A trading robot is an algorithm linked to the data of a trading exchange that requests the current data every second. Requests go back and forth to the trading exchange and the trading robot platform every second. It depends on the predefined indicators based on which the robot trades, but in general, these actions require a lot of computing power. This was simply not possible twenty years ago when computers were already more common.
Today that is an entirely different story. More than ninety percent of all trading positions are automated based on thousands of factors that are adjusted every second. These computers are often roaring in large data centers owned by large trading offices. The offices can weigh up their choices accurately every second based on a lot of data. That data is complex and complicated, but with the help of intelligent innovations, you too can now trade with a robot.
You too can trade automatically
The phone in your pocket is capable of performing complex tasks and therefore can also trade automatically. Using a mobile application, you can set up a robot to trade for you in minutes. This is currently being done by various parties and often also by individual developers who develop the robots themselves. However, finding the right robot is often challenging because there are so many of them. Who wants the best for you, and what is a profitable robot that fits your investor profile? These are questions that matter when you start the search for a suitable trading robot.
BOTS has developed a mobile application in which you can find and start your trading robot within minutes. Different developers can offer their robots on the platform, and everyone can use them. Usually, a license for one of these robots is very pricey, but with BOTS, you only pay for the trades made, which is a minimal and fair amount. For now, the robot only trades with cryptocurrencies like bitcoin (BTC) and cardano (ADA), but in the future, the goal is also to support the shares of large companies.
BOTS regularly shares performance updates of these trading bots. These updates are especially interesting in times of price crashes or declines. You will often see that the trading bots manage to minimize losses as trading bots only trade based on indicators, not on fear or other emotions (because they don’t have any). So keep an eye on our social media channels to receive these updates and download the BOTS app to start your trading bot today!
There is no such thing as risk-free trading. It is possible to lose (part of) your stake.