Trading assets online and consistently outperforming the markets is no easy feat. In fact, this is something achieved by very few online traders. After all, you need to dedicated hours-on-end to technical analysis and fundamental research – and then act on your findings by entering risk-averse buy and sell positions.
With this in mind, it might be worth considering an algorithmic trading system. Also known as algo trading, this allows you to trade without in a fully or partly-automated manner, as the underlying software will make decisions on your behalf.
In this guide, we explore everything there is to know about algorithmic trading in the UK – as well as which providers and brokers are worth your time.
Table of Contents
How to Start Algorithmic Trading in 3 Quick Steps
Looking to start trading with an algorithmic system right now? If so, follow the 3 steps outlined below!
Step 1: Open a Trading Account
Open a brokerage account with with an FCA-regulated platform that offers copy trading.
Step 2: Deposit Funds
Deposit funds to your account by debit or credit card, e-wallet, or bank transfer.
Step 3: Start Algorithmic Trading
Allocate some funds to your chosen copy trading portfolio to benefit from passive investing.
What is Algorithmic Trading?
Put simply, algorithmic trading is the process of buying and selling assets in an automated manner. That is to say, your trading decisions will be driven by pre-programmed algorithmic software.
This is something that large-scale financial institutions have been doing for many decades behind the scenes. Fully in-line with the age of digitization, UK algorithmic trading systems are now available to the average Joe.
This opens up a world of possibilities for those of you that have little to no experience in how online trading works. Similarly, if you simply don’t have the time to research and trade financial instruments, an algorithmic system might be exactly what you are looking for.
The main concept of entrusting your funds with a piece of automated software is the technology can scan the markets 24/7. Whether that’s stocks, ETFs, forex, cryptocurrencies, or commodities – the underlying algorithmic has the potential to consider millions of trading scenarios each and every second.
Furthermore, the algorithm does not make reckless, emotional, or irrational trading decisions – nor does it suffer from fatigue. As such, this gives you the opportunity to invest in a risk-averse manner, not least because the algorithm is programmed to follow a strict set of trading conditions.
How Does Algorithmic Trading Software Work?
First and foremost, the algorithmic trading software is only as good as the person that built it. This is important to remember, as systems are built from the ground-up. Everything is based on ‘what-if’ conditions, meaning that the underlying software does not have the capacity to trade outside of these parameters.
- The algo trading system might be programmed to buy Apple shares when the stock price surpasses the 200-day moving average
- Similarly, the software might enter a sell position on GBP/USD when the RSI exceeds 70
With this in mind, the software bases all trading decisions on technical analysis. That is to say, the technology is tasked with scanning the markets via technical indicators, with the view of finding trends.
There are, however, several types of algorithmic trading programs available in the UK market. As we discuss in the more detail in the sections below, the product that you opt for should mirror the amount of control that you wish to give to the software.
Best Algorithmic Trading Software
If you are looking for an all-in-one automated trading system that requires virtually no input, you’ll want to consider an auto-trading robot. Otherwise referred to as a ‘trading bot’ or ‘expert advisor’, the autotrading robot will perform all trading duties on your behalf.
- Performing technical research
- Placing buy and sell positions
- Setting up stop-loss and take-profit orders
As such, the automated robot allows you to sit back and trade in a 100% passive manner. In order to use an auto trading robot, you will need to find an online provider with a credible reputation. In fact, it’s best to stick with providers that offer verifiable trading results. After all, most algorithmic trading systems in the space claim to make unprecedented financial gains – but very few actually do.
Once you find a robot that you like the look of, you will need to purchase and download it from the respective provider. Then, you’ll need to install the robot onto a third-party trading platform such as MT4. Once you provide authorisation, the robot will proceed to enter buy and sell positions on your behalf.
As the name suggests, a semi-automated robot gives you an element of control over your trading decisions. While its fully-automated counterpart will place buy and sell orders, semi-automated robots are tasked with performing research.
That is to say, the robot will scan the financial markets on a 24/7 basis, constantly looking for profit-making opportunities. Once again, the underlying software will utilize technical indicators like the RSI or MACD in its quest to evaluate charting trends.
Once a trading opportunity is discovered by the algo trading system, the software will notify you. Then, you will have the chance to manually assess the robot’s findings. If you think the trading suggestion looks viable, you will then need to manually place the respective buy or sell order.
Trading Signal Service
An additional way to access the UK algorithmic trading phenomenon is to use a signal service. This works in a similar way to a semi-automated robot, albeit, there is no requirement to purchase or install any software.
Instead, you will be using a third-party provider that has built an algorithmic trading system of their own, but don’t wish to release the underlying code to the public. This makes sense, as it can take many years to build an algorithm that has the potential to consistently outperform the market.
A trading signal service typically works like the below example:
- You buy a forex signal service that specialises in major and minor currency pairs
- The provider sends you a real-time signal when the algorithmic software finds a trading opportunity
- The signal will provide the currency pair, whether it’s a buy or sell order and the entry price
- You will also receive the required stop-loss and take-profit price
Once you receive the signal, you will be required to act on it with your chosen trading platform. There is no requirement to use a platform that is compatible with MT4, as you won’t be relying on software. Instead, you simply need to place the respective order as you normally would.
We should also mention Copy Trading as a viable option. This is where you will select an expert trader that is active in your desired field (stocks, bonds, cryptocurrencies, etc.), and then copy their buy and sell positions like-for-like. On the one hand, this isn’t strictly an algorithmic trading system per-say, as your chosen trader will be performing research and placing orders manually.
With that said, the Copy Trading process provides you with exactly the same end-result. That is to say, once you allocated some fund to the trader, there is nothing more to do. On the contrary, you can sit back and enjoy a 100% passive strategy.
You can exit your position at any given time, with the proceeds placed instantly in your brokerage cash account. When using leading Copy Trading broker eToro, you can manually edit, remove, or add positions to your portfolio. This social trading platform gives you the best of both worlds, as you still have an element of control over where your money goes.
Benefits of Algorithmic Trading
Still not convinced about what algo trading systems can do for your long-term investing goals? Below you will find some of the many benefits associated with the phenomenon.
Scan the Markets 24/7
It goes without saying that human traders are limited in how much time they can dedicate to trading. At the forefront of this is the research process. That is to say, performing technical analysis on a manual basis can require hours of dedication each and every day. After all, the financial markets can change course at an incredibly fast pace.
On the flip side, algorithmic trading systems can scan the financial markets on a 24/7 basis. They never experience fatigue either, so you can alleviate the risk of making judgements of error. Ultimately, by employing the services of an automated algorithm, you will never miss a trading opportunity again!
Trade Around the Clock
This particular benefit leads on from the section above. Not only can the algo trading system research around the clock, but it can do the same when it comes to placing trades. This means that by leaving the robot running at all times, you can buy and sell financial instruments all day, every day.
Millions of Scenarios
When a human trader analyses the markets, there are only so many scenarios that the individual can consider at once. This is in stark contrast to a pre-programmed algorithm. In fact, when you consider the capabilities of cutting-edge technologies like AI, the algorithm can consider millions of potential outcomes each and every second. Crucially, the software is going to outperform the human brain by a considerable amount.
Trade Thousands of Assets Effectively
Seasoned traders will often specialise in a single asset class – like stocks, forex, or bonds. In fact, some traders will niche down even further – for example, only trading currencies denominated in US dollar or stocks listed on the NASDAQ.
This makes perfect sense, as it allows the trader to focus on a small set of pricing charts and ultimately, become an expert in the respective instrument.
However, this does mean that you are potentially missing out on a significant number of trading opportunities.
At the other end of the spectrum, an algorithmic trading bot can trade thousands of financial instruments at any given time. This is because the software is pre-programmed to follow a set of strict conditions, of which there is no limit.
If opting for a fully-automated trading system, you will be buying and selling assets in a 100% passive manner. This is something craved by many investors – especially those that do not have the required time to dedicate to trading. With that said, it is important to remember that there is no guarantee that your trading robot will make you money. Instead, if the software hasn’t been programmed well, you could make a loss.
Algorithmic Trading Strategies
There are many algorithmic trading strategies that a provider might consider using. Some systems will rely exclusively on just one strategy, while others will deploy many. While discussing hundreds of algorithmic trading strategies is beyond the remit of this guide, below you will find a selection of the most widely used.
Arbitrage trading is one of the most sought-after strategies in the online investment space. For those unaware, this particular strategy looks to profit when an asset is priced differently on two or more brokerage sites.
A simple example would be:
- Nike shares having a buy price of $100.50 on Broker 1
- Nike shares having a selling price of $100.55 on Broker 2
Now, profiting from arbitrage opportunities is virtually impossible when attempting to do it on a manual basis. For example, you would need to manually check each and every price across all of the brokers that you have accounts with.
When you consider that the best online trading platforms offer thousands of financial instrument, this just wouldn’t be possible. Even if you were able to do this, arbitrage opportunities typically remain in place for a matter of seconds. As such, you likely wouldn’t be able to act on the opportunity fast enough.
This is where an algorithmic trading system can help, not least because it can perform all of the aforementioned duties in micro-seconds.
As the name suggests, this particular strategy looks to follow market trends and cycles. That is to say, if an asset is enjoying a prolonged period of bullishness, the algorithmic trading system will look to follow suit by placing a buy order. Similarly, if an asset is in a bearish cycle, the algorithmic will place a sell order.
With that said, executing a trend strategy is easier said than done. This is why the software will operate alongside technical indicators and machine learning technologies. It will specifically analyse metrics like the channel breakouts and moving averages.
Then, on the balance of probabilities, the algorithm will determine which way the asset is likely to move in the short-run. Naturally, the trend strategy employed by the software won’t always get its prediction right. As such, each trade will have an exit plan in place – notably in the form of stop-loss orders.
Algorithmic Trading Python
Algorithmic trading software is typically built using a specific programming language. At the forefront of this is python, not least because the language has the framework to meet the requirements of an autonomous trading system. Don’t forget, the overarching objective of the algorithm is to outperform the markets.
In order to do this, it needs to consider millions of potential trading outcomes each and every second. The software will look to do this on a rolling 24/7 basis – potentially across thousands of assets. As such, algorithmic trading python systems are ideal for this purpose.
Best Algorithmic Trading Platforms
So now that you know how algo trading systems work – as well as the different types available to you, we are now going to discuss platforms. Below you will find a selection of providers that allow you to trade in a fully, or semi-passive manner.
1. eToro - Algorithmic Trading via CopyPortfolios
eToro is an online broker that boasts 12 million active trading accounts. Regulated by the FCA, the platform allows you to trade stocks, ETFs, cryptocurrencies, indices, commodities, and forex. In particular, eToro stands out for its site-wide commission-free offering.
eToro is best known for its social trading network and CopyTrader feature. As we covered earlier, this allows you to select an expert trader that is actively involved in your preferred asset class. eToro offers a search and filter system that allows you to find a suitable investor.
For example, you can specifically look for a forex trader that has been making consistent profits of at least 20% annually for the past two years. Once you find a trader, you can elect to copy their portfolio and ongoing positions like-for-like. It is important to note that you do have certain freedoms in selecting a trader.
However, while the CopyTrader tool doesn't utilise a trading algorithm, eToro CopyPortfolios do. These are professionally managed that fuse machine learning with expert human management and are designed to maximise diversification and minimise risk. The portfolios use an algorithm that selects the 50 top traders most likely to generate a profit each month.
You can also elect to add assets to your portfolio. In terms of the fundamentals, eToro is licensed in three jurisdictions, including the UK. You can instantly deposit funds with a debit/credit card or e-wallet. The minimum deposit amount is $200 - as is the minimum investment per copy trader.
- Trade commission-free
- Regulated in the UK by FCA
- Social trading tools
- User-friendly trading platform
- 0.5% currency conversion fee on deposits
2. AvaTrade - Top Broker With Algo Trading on MT4/MT5
If you are looking for a fully-automated algorithmic trading robot, you will need to find a platform that supports MT4 or MT5. The former, in particular, is typically the go-to option for developers, as they know that MT4 is the most widely-used trading platform in the space. A good choice in this respect is AvaTrade - which supports both MT4 and MT5.
The platform is home to thousands of financial instruments, which ensures that your chosen bot will have access to the assets that it wishes to trade. This includes CFDs in the form of stocks, ETFs, futures, hard metals, energies, and more. Much like eToro, AvaTrade does not charge any trading commissions.
The platform also offers tight spreads, and fee-free deposits and withdrawals. You can fund your account with a UK debit/credit card or bank transfer. Minimum deposits start at £100. After registering, you will then need to log into MT4/5 with your AvaTrade credentials and install your chosen robot.
Once you provide authorisation through MT4/5, the algorithmic trading software will begin to buy and sell instruments on your behalf. Most importantly, AvaTrade is heavily regulated. It holds licenses in several countries, including Ireland, Canada, and Japan.
- Spreads from just 0.9 pips
- Multiple licenses
- Both MT4 and MT5 supported
- No fundamental research features
- Its educational resources are sparse
3. IG - UK Broker With MT4 and ProRealTime Software
IG seems to cover most bases in the online investment space. On top of traditional shares, ETFs, and investment trusts, you can also trade CFDs. Spread betting facilities are also available for tax-free gains. In total, you will have access to over 17,000 financial instruments - which makes IG one of the most extensive in terms of supported assets.
Much like AvaTrade, IG is compatible with MT4. This means that you can install a fully-automated trading robot at the click of a button. If you're an experienced trader, you'll be pleased to know that IG has integrated with ProRealTime. This is an advanced charting software package that allows you to deploy automated CFD trading systems.
You can build algorithms and set up trading conditions directly in the software, which gives you ultimate control over your automated strategies. In terms of getting started, IG requires a minimum deposit of £250, which you can do with a debit/credit card or bank transfer. The broker is heavily regulated, which includes a license with the FCA.
- Trade futures via CFD instruments
- All fees built into the spread
- Excellent research department
- 1% fee when using Visa and 0.5% via MasterCard
- Spreads on some crypto pairs are somewhat expensive
4. FX Master Bot - Semi and Fully-Automated Forex Robot
If you are looking to target the multi-trillion pound forex trading scene, it might be worth exploring FX Master Bot. The platform, which was launched in 2017, gives you the choice of a fully or semi-automated service. If choosing the latter, the provider will send you trading signals when the underlying algorithm spots an opportunity.
You can then manually review the suggestion before acting on it with your chosen broker. This option is ideal if you don't feel comfortable allowing a robot to trade on your behalf. Alternatively, if you want to enjoy a 100% passive strategy, FX Master Bot also offers this.
You simply need to make a deposit of $250 or more, and the provider takes care of the rest. In total, the provider targets 17 different forex pairs, alongside a selection of digital currencies like Bitcoin.
- Choose from a semi or fully-automated strategy
- Trade 17 different currency pairs
- Several cryptocurrencies also supported by the robot
- Launched as recently as 2017
5. Learn 2 Trade - Best All Round Forex Signal Service
Some investors prefer to take the trading signal route, not least because it offers the best of both worlds. On the one hand, the algorithmic software will take care of the most time-consuming area of trading - research. On the other hand, you are under no obligation to act on the software's findings, as you will be required to place a manual buy or sell order on receipt of the signal.
Our top-rated signal provider Learn 2 Trade, has built a highly advanced algorithmic that scans the markets 24 hours per day, 7 days per year. Once a trading opportunity has been discovered by the software, Learn 2 Trade will send you a notification in real-time via Telegram. As long as you have your mobile phone and an internet connection, you will never miss a profit-making opportunity.
In particular, the software is tasked with analysing forex and cryptocurrencies. Each signal contains the specific asset and order type (buy or sell), the entry price, stop-loss price, and take-profit target. This ensures that each trade is placed in a risk-averse manner. In terms of pricing, Learn 2 Trade offers two options. For those that are yet to try the provider, the free account offers 3 signals per week.
The premium package, which is available from just over £14 per month (6-month plan), provides you with 3-5 signals per day. What we like about Learn 2 Trade is that the platform offers a 30-day money-back guarantee on its premium package. This allows you to try each and every signal out through a brokerage demo account. Then, if you are pleased with the results, you can start acting on the signals with real money. If not, you can ask for a full refund.
Plan Type Price Cost/Month
- 1 Month: £25
- 3 Months: £55 (£18.33/month)
- 6 Months: £85 (£14.16/month)
- Excellent reputation in the forex signal scene
- Signals sent in real-time via Telegram
- Premium plan from just over £14 per month
- Focuses exclusively on forex/crypto - no other asset classes supported
Algorithmic Trading Fees
Here’s an overview of what fees you need to consider with the algorithmic trading platforms listed above.
|Equity Broker||Product Cost||Deposit Fees||Minimum Deposit|
|eToro||No additional fees to copy trade||0.5% currency conversion||$200|
|IG||£0 – £10 if buying and selling, variable spread for CFDs||Free (0.5%-1% on credit cards)||£250|
|FX Master Bot||Free to register||Not specified||$250|
|Learn 2 Trade||From £14.16 per month||N/A||N/A|
Fees and commissions can change at any time, so make sure you
Algorithmic Trading Tips
The ability to research and trade 24 hours per day in a 100% passive manner is something that will appeal to most investors in the UK. Unfortunately, it’s not as simple as just purchasing a robot and letting it do its thing. On the contrary, the algo trading space is dominated by rogue providers that make hyperbole claims. While not all providers are scam artists, many are.
With this mind, below we have listed five algorithmic trading tips that will reduce your risks of losing money.
Tip 1: Verifiable Trading Results
Making returns of 40% each and every month sounds great on paper, but how do you know that the algorithmic trading provider is telling the truth?
The fact is that anyone can build an impressive website that makes super-bold claims are guaranteed profits, but much of the time this won’t be the case.
As such, it is crucial that you have a way to verify the provider’s historical trading results. In an ideal world, the provider will have linked their trading account with Myfxbooks.
This is a third-party platform that allows traders to publish their results in a public manner. If your chosen algorithmic platform has done, it’s certainly a good start.
Tip 2: Public Reviews
Researching an algo trading provider from top to bottom is crucial. At the forefront of this is searching the internet for reviews of actual users. This is isn’t always an easy feat, as scam artists have been known to leave fictitious reviews of our own product – which are obviously overly positive!
But, you can generally make a judgement on the credibility of reviews. A great metric to look at is with respect to the number of individual reviews that a rating is based on. For example, an 8/10 rating over 10,000 reviews is going to be much more reliable than a 9/10 rating over just 25 reviews.
Tip 3: Trial or Money-Back Guarantee
If the algo trading provider is confident in what they offer, they will have no issue with offering new customers a safeguard of some sort. For example, the likes of Learn 2 Trade offers a free signal service that consists of 3 suggestions per week. None of the data is hidden or blackout out, either. The same provider also offers a 30-day money-back guarantee on its premium package.
Tip 4: Start With a Demo Account
Once you have performed some due diligence on the provider, it’s best to start with a demo account facility. By this, we mean that you should install the algorithmic trading software into your MT4/5 demo account, and let it trade freely for at least a couple of weeks. Doing this for a solid month would be even more beneficial.
At the end of your ‘trial’, you will then have a full birds-eye view of how the algorithmic robot performs. Not only in terms of profits and losses, but important metrics like risk, stop-loss to take-profit ratios, and preferred asset classes. If everything looks positive, only then should you consider allowing the robot to trade with your capital.
Tip 5: Diversify, Diversify, and Diversify Some More
Irrespective of what asset class you invest in, the golden rule is to diversify as much as possible. This sentiment could not truer when it comes to algorithmic trading in the UK. Sure, your chosen robot might go on an unbelievable run of results, but there is no guarantee that this will always be the case.
In other words, the robot might encounter a substantially bad trading month and lose more money than you had anticipated.
The easiest way to protect your trading capital from such a scenario is to employ the services of many different providers. Not only this, but each algorithmic provider should target different asset classes with varying strategies. This way, if one or two robots have a bad run of results, you won’t feel the impact of this anywhere near as much.
Algorithmic Trading Pros and Cons
- Trade in a truly 100% passive manner via an algorithmic trading robot
- Algorithmic software does not experience fatigue or irrationality
- Research the markets 24/7 without needing to do any of the work
- Adjust your trading system to meet your personal goals
- Test the algo trading provider out via a demo account
- Opt for trading signals if you do not want the algorithmic to place trades for you
- Most algorithmic systems lose money in the long run
- It can be difficult to verify the claims made by a provider
How to Start Algorithmic Trading
If you have read our guide up to this point and you are keen to get started with algorithmic trading right now, following the steps outlined below. Our walkthrough is based on the Copy Trading feature offered by FCA-regulated eToro.
This is because the platform offers the most transparent option in the automated trading arena. Due to the fact you can view the full historical trading results of each and every trader on the site. You also have the flexibility of being able to set your own stakes, adjust positions, and add or remove specific assets from your portfolio.
Step 1: Register an Account
eToro is an FCA-regulated broker, so you will need to quickly go through the account opening process. This is much the same as any other broker in the online arena and will require some personal information from you.
You will also be asked to upload a couple of verification documents. This includes a copy of your passport/driver’s license and a recently issued bank account statement or utility bill. eToro should be able to validate the documents within a couple of minutes.
Step 2: Deposit Funds
You will need to deposit at least $200 at eToro. This is the same figure required to invest in an automated Copy Trading portfolio.
Supported deposit methods include:
- Debit/credit cards
- Bank transfer
If you want to diversify into several traders (which is recommended for diversification purposes), you will need to do this in increments of $200. For example, if you were to diversify your risk across three traders, you would need to deposit $600 and then allocate $200 into each portfolio.
Step 3: Find an Expert Trader to Copy
eToro is home to thousands of copy traders, so you’ll need to spend some time researching an investor that meets your long-term goals.
For example, are you looking for a trader that has a good track-record buying and selling currencies, or are you more interested in targetting the equity trading space?
Either way, eToro allows you to choose your preferences through the filter button.
Step 4: Allocate Funds
Once you have chosen a Copy Trader, you will then need to allocate some funds. As noted earlier, this needs to be at least $200 per trader. By default, you will instantly copy the trader’s current portfolio. If you wish to mirror all ongoing buy and sell orders, you need to select this.
You can exit some, or all, of your position at any given time – as long as you do not fall below the $200-mark.
More and more UK-based investors are turning to algorithmic trading providers. After all, they allow you to trade on a full-time basis without you needing to do any of the legwork. Behind the scenes, the software will continue to research the markets on a 24/7 basis – and it never experiences emotions or fatigue.
With that said, the most challenging part for UK investors is finding a legitimate provider that meets their needs. This is why you need to perform enhanced research before parting with your money.
If you are looking for the easiest, safest, and most cost-effective way of engaging in an automated trading system, eToro is a notable option. The FCA-regulated platform allows you to trade in a fully passive manner via its Copy Trading feature. It takes just minutes to set up an account and choose an expert trade that meets your needs!
eToro: Best Algorithmic Trading Platform UK
- Algorithm based CopyPortfolios
- Social trading network
- Wide range of assets
- Low fees
- FCA regulated
How can I build an algorithmic trading system?
The process of building an algo trading system from the ground-up can take many years. Before you get to that stage, you will first need to have a solid understanding of programming languages like Python. You will also need to have a firm understanding of the wider financial markets.
Does algorithmic trading guarantee profit?
There are no guarantees that your chosen algo trading system will make you money. On the contrary, there is every chance that you will lose money.
How can I avoid algorithmic trading scams?
There are many steps that you can take to ensure you do not become a victim of an algo trading scam. This includes performing enhanced research on the provider, finding a way to verify their historical trading results, and testing the system out via a demo account.
How do you install an algorithmic trading platform?
Most algorithmic trading software is built for MT4. This means that you will need to find a broker that offers support for the third-party trading platform. Once you are logged into MT4 with your brokerage credentials, you will need to instal the software. Finally, you'll need to provide authorisation on MT4 that you are happy for the software to trade on your behalf.
How much do algo trading systems make?
There really is no one-size-fits-all answer to this. Ultimately, while some providers make money, others don't. The amount you are able to make will depend on how successful the system is - and how much you typically stake on each trade.
Is there a Bitcoin algorithmic trading system?
Yes, there are many Bitcoin algorithmic trading systems available in the market. As always, perform lots of research before taking the plunge.
Do online brokers allow algo trading systems?
Absolutely. After all, brokers are in the business of making money - which they do irrespective of which way the markets go. As such, the more trading volume the broker can attract, the better it is for its bottom line.