When evaluating the performance of a trading robot, it’s common to focus on two main factors: how much money it makes and how often it trades. But this raises a common question among users: is a robot that makes many trades with small profits better, or one that trades fewer times but earns more profit per trade?
The answer depends on the type of investor, available capital, and investment objectives. However, there are also important technical factors worth considering.
Robots that operate frequently
Robots that make many trades per day are usually designed to take advantage of small market movements. This allows for faster results and can give the impression that the strategy is more active or dynamic.
But this high frequency also comes at a cost: each trade generates expenses, such as commissions, spreads, and potential slippage. If these aren’t properly controlled, they can significantly reduce real profits.
Robots that operate less frequently
Low-frequency robots, on the other hand, are more selective. They only trade when they detect very specific market conditions. They can spend several days doing nothing, but when they do act, they usually look for larger movements and more reliable signals.
This can mean higher profits per trade, although it requires more patience from the investor. Furthermore, these strategies often require more solid logic to continue working without constant adjustments.
Quantity or quality?
From a statistical perspective, the most important thing isn’t how many trades you make, but how good they are. For example, a strategy that makes 10 trades a day with minimal profit may be less profitable than one that makes only 3 a week but offers a better risk-reward balance.
Importance of market context
It’s also key to observe how the robot behaves in different market conditions. Some high-frequency robots perform well when there’s high volatility, but not so well when the market is stable. Low-frequency robots, on the other hand, can go for long periods without trading, which sometimes raises questions about their effectiveness.
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