The professional traders use a different kind of strategy to make consistent profit from this market. Every trader has a unique trading method since they curate the strategy according to their personality. Being a rookie trader, you might trade the market with the purchased trading method but this is not going to work unless the system syncs with your personality.
Based on the personality of the retail traders, traders can be divided into two major groups.
These are –
- Day traders
- Position traders
- Swing traders
The short time framer traders usually execute the trades in the lower time frame. In the professional trading community, we call them scalpers or the day traders. They prefer to analyze the 1 hour and lower time frame so that they can execute more trades. On the contrary, the higher time frame traders use conservative approaches to execute their trade.They are often known as swing traders or position trader.
Short time frame trading or scalping strategy is a hectic process. The traders have to monitor important metrics constantly to find good trades. What if you can ease the hassle by using a scalping bot? Well, thousands of professional traders are using trading bots and making millions of dollars. In this article, we are going to discuss the key things which you must consider while creating the scalping bot.
The skill of the developers
As a scalper, you have to understand time is money. A few second delays in the price feed might result in big losses. You might have the best scalping logic but if the developers embed that logic in faulty codes you are not going to make any profit. The trading bots must have the ability to deal with the dynamic price without any latency.
In other words, the bot must have the ability to create real-time suggestions for the scalpers. And it will be only possible when you hire skilled developers.
Your trade execution plan
The developers will code the scalping bots based on your scalping plan. Those who are thinking that the machine will do all the hard work so it is better to include tons of parameters. But in reality, including tons of parameters decreases the success rate. Before you even think to automate your trading process by creating a scalping bot, you must trade the market using the manual method. If you manage to scalp the market like the pro traders for a few months, you can start developing your trading bots.
Risk management policy
The scalping bot should be well equipped with risk management coding. For instance, it should not be always looking for trade setups once the target is filled. A professional scalper usually takes 3-6 trades in a day. Tell the developers to create a unique function by which you can determine the maximum number of trades the bots can take per day. The bot should be also equipped with the risk management policy so that it never risks more than any amount which you can’t afford to lose.
Managing the risk should be done just like professional traders. The trades that are taken by the bots must have a 1:2 risk to reward ratio or else it will have a tough time to recover the loss. Make sure the basic risk management strategy is implemented to your scalping bots.
Dealing with the news
The professional scalping bot only trades in a stable market condition. They extract news information from the reputed websites and stay in the sideline on the event of high impact news. Though the trade condition might be full filled still it will not take the trades. But some of you might love to scalp the news. For them, minor adjustments to the scalping bots can solve the issue.
For instance, the bot will extract critical news information and create a small summary. After analyzing the news summary, if you feel comfortable with the scalp, use the manual trading method.
Slippage and false spikes
Slippage can become a very problematic issue for the scalping bots. This usually results in poor stop loss and take profit placement as the trades are not triggered at the desired price. So, the bot should have the ability to adjust a few pips slippage in any market. And make sure the scalping bot is not using the ideal stop for the trade as the false spike will hunt down the trade.
The professional scalpers use logic and experience to ensure quality trade execution. Your scalping bots might not have experience but it can have all the logics. Embed your ideas via source code and test your bot performance in the demo account. If you feel comfortable with the trading result, scalp the real market with your scalping bots.