Are trading robots legal?

Trading using automated systems like trading robots can provide many opportunities to develop and build trading strategies that can be adjusted to the appropriate changes in a market, while still preserving their effectiveness. However, there are concerns regarding the legality of such trading tools.

If a country has regulations in place, investors are more likely to feel secure that they are trading in a safe environment without risking a loss of funds due to being provided with incorrect information or working with brokers that guarantee profit with their own trading bots. That being the case, as long as there are no laws restricting manual trading, then there would be none against automated trading robots either. However, in countries like India that have laws that forbid trading Forex with overseas brokers, trading or automating the trading of such instances, would be considered illegal.

Are trading robots legal? Photo by Austin Distel on Unsplash

In general, when it comes to trading bots and utilizing them as a part of your trading experience, it depends on precisely what your trading needs are. They can be an invaluable asset to your trading strategy and can provide you with a clear direction to approach the different markets with.

There are several types of trading bots that can be found when you begin looking for one. Knowing what they are and how they are created can serve as a hint to find the best option for you.

Such advisors have multiple benefits, one, in particular, is that they don’t take control of the trading process, so you can still make your own decisions. This means you can conduct your own market research and back-test with historical data. On the other hand, AI bots are those trading bots that replace the skills of the trader by taking off their backs the market research and any actions towards opening or closing positions. However, the traders should keep in mind that these types of bots can expose investors to more risks due to several reasons like overall service cost and moreover, promises and guarantees to make profits. In countries with regulatory authorities regarding trading, brokers that make such guarantees can fall into the illegal category.

Trading bots themselves are not a money-making machine, but they are a tool that helps you make trading easier. If a bot is built correctly, it would only serve as additional support and the outcome of a trade would be determined primarily by the skills and knowledge of a market that a trader possesses.

Trade signals are another automation tool that helps improve trading efficiency and whose goal is to bring more profit to the trader. They can be either bought or sold, but there are concerns regarding the legality of such actions. This depends entirely on the target country a signal is sold to and the platform used to sell it. There are trading platforms that provide legal means to the buying and selling of signals, promoting the act of copy trading.

Where there is demand, there is profit, and supplying the essentials can go a long way. Take the Forex venture as an example — it is popular and has a large number of participants on a global scale. Revenue generation is more compared to other ventures, with statistics showing around 80% of its traders making profits by way of the trading system at hand. A more concrete example would be a system that claims to generate 50% monthly returns with 4% drawdown and 70% win that is also available to users who want to sell their signals for a $100 fee per month, which can result in almost $100 million in revenue if the user-base is around 1 million.

A different approach exists, however, where individuals who decide to go that route independently and sell their own trading signals would have to go through several hoops, in accordance with the region’s trading laws. A license for providing trading recommendations and/or copy trading would be necessary, for example, for traders who want to sell their signals in the UK or US, regardless of their country of residence.

You shouldn’t worry about the legality of algo-trading if you’re using trading platforms like MetaTrader 4 (MT4) and MetaTrader 5 (MT5), which both offer investors the option to sell their trading signals in a legal manner

Trading on margin is high risk.

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