How to Create a profitable Stock Trading Robot?

It is worth to mention that with today’s available technologies, retail traders and investors do not require to have any programming skills to develop a good stock trading robot. Using AlgoEdge Labs platform, anyone can create a stock trading robot or trading algorithm within minutes.

But before you start developing your stock trading robot, it is important to learn and understand the process and its technicalities. Several steps are essential thru the development and testing activities towards launching your stock trading robot and accomplishing the trading algorithm.


If you do well and develop a great trading algorithm, your stock trading robot can earn you thousands within minutes.

Chose a suitable Time Frame

A well-done stock trading algorithm can run on its own, but at least in the beginning, some human oversight is recommended. Therefore, you should choose a time frame and a trade frequency of the stock trading robot that you are able to monitor. If you have a full-time job and your trading algorithm is programed to make hundreds of trades a day on a one-minute chart while you are at work, that may not be ideal. You may wish to choose a slightly longer-term time frame for your trades, and less trade frequency so you can keep tabs on it.

Financial constraints are also something to consider. Commissions rack up very quickly with a high-frequency trading algorithm, so make sure you’re with the lowest-cost broker available, and that the profit potential of each trade warrants paying those commissions, potentially many times a day. Starting capital is also a consideration. Different markets and financial products require different amounts capital. If day trading stocks, which is a case for stock trading robot, you’ll need at least $25,000.

Market constraints are another issue. Not every market is suited to algorithmic trading. Choose stocks, ETFs, forex pairs or futures with ample liquidity to handle the orders the algorithm will be producing.

Trading Algorithm does not live forever

Profitability in the testing phase of the trading algorithm doesn’t mean tour trading robot will continue to produce returns forever. You will need to step in and alter the trading algorithm if the results reveal it isn’t functioning well anymore. This is also a time commitment that anyone who undertakes algorithmic trading must accept. Over a period of time the market conditions change and evolve and therefore the trading algorithm which are developed on irrelevant past date is no longer valid.

Think like a Robot 

Always think like a stock trading robot. You may have a strategy that you trade manually, but ask yourself is it easily translated to a trading algorithm? If your strategy is highly subjective, and not rule based, programming the strategy could be impossible. Rule-based trading strategies are the easiest to create – strategies with entries, stop losses and price targets based on quantifiable data or price movements.

Testing your Stock Trading Algorithm

The most important step is testing. Once a trading strategy has been created, don’t run your stock trading robot on real money with it until it has been tested. Testing includes letting the trading algorithm run on historical price data, showing how the stock trading robot performed over thousands of trades. If the historical testing phase is profitable, and the statistics produced are acceptable for your risk tolerance— such as maximum draw down, win ratio, risk of ruin, for example—then proceed to test the stock trading robot in live conditions on a demo account. Once again, this phase should produce hundreds of trades so you can access the performance.

If the trading algorithm is profitable on historic price data and trading a live demo account, use your stock trading robot on real capital but with a watchful eye. Live conditions are different than historic or demo testing, because the trading algorithm’s orders actually affect the market and can cause slippage. Until it is verified the algorithm works in the real market, as it did in testing, maintain a watchful eye.

Continual Maintenance

As long as the stock trading robot is operating within the statistical parameters established during testing, leave the trading algorithm alone. Stock trading robots have the benefit of trading without emotion, but a trader who constantly tinkers with the algorithm is nullifying that benefit. The trading algorithm does require attention though. Monitor performance, and if market conditions change so much that the trading algorithm is no longer working as it should, then adjustments may be required.

The Bottom Line

Algorithmic trading isn’t a set-and-forget endeavor that makes you rich overnight. In fact, using a stock trading robot can be just as much work as trading manually. If you choose to create a trading algorithm, be aware of how time, financial and market constraints may affect your strategy, and plan accordingly.

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