The Magic Behind Algorithmic Trading Bots

  1. Check relevant information. The trader will examine past and present market and trade prices.
  2. Guess the future direction. From the current and previous prices, they know the last hour’s direction. In our scenario, the trader believes this direction will continue.
  3. Look at their existing positions. Let’s say that last-hour direction up. The trader is looking to buy, but now they assess their existing positions to see if buying makes sense. If they have already bought too much and are very long, they may sit this one out. Note that the same analysis applies if the last-hour direction is down.
  4. Trade. The trader sends an order to the market to increase, reduce, or reverse their positions.
  5. Repeat the process indefinitely. The trader will repeat steps 1 through 5 until they decide to stop.

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