Definition
In algorithmic trading, a program decides when to open and close trades according to predefined rules. It may run on your own account (for example a MetaTrader expert advisor) or on a PAMM account whose manager uses a robot.
Strengths
- Disciplined execution without emotion.
- Round-the-clock operation across several markets at once.
- Rules that can be tested on historical data.
Hidden risks
| Risk | Explanation |
|---|---|
| Overfitting | A system tuned perfectly to past data fails in live markets |
| Martingale and averaging down | Increasing size after losses: long stretches of small wins, then a sudden large loss |
| Changing market regimes | A rule that worked in one volatility regime fails in another |
| Technical dependency | Server or internet outages, or changes in broker conditions |
Evaluating an algorithmic account
- Judge by the live account connected to a data source, not by backtest results.
- Look at the maximum drawdown and how long losing periods lasted.
- Weigh the average win against the average loss alongside the win rate.
- Ask whether position size increases after losses.
- Consider the length of the record; a short record says little, even with good numbers.
Buying a robot
If you buy a robot or expert advisor, use verified sellers in the services marketplace, where your payment is held until you confirm delivery.
Last updated: 2026-10-18
These guides are educational and are not investment advice. Trading and investing in financial markets can lead to the loss of some or all of your capital.