A trading bot is software that automates some or all of a trading process. It can read market data, evaluate conditions and submit or manage orders according to configured rules or models. Automation does not make the underlying strategy profitable.
What gets automated
A bot might place scheduled purchases, maintain a grid of limit orders or respond to an indicator. It may run within a platform or connect through an API. The strategy still needs defined markets, order sizes and behavior when prices or balances change.
Submitting an order is not the same as receiving a fill. A bot must track partial executions, cancellations and failures; blindly repeating an uncertain request can create unintended exposure.
Testing and supervision
Historical backtests depend on data and assumptions. Results that ignore fees, slippage, execution constraints or changing market conditions may overstate performance. A simulated result is not a promise of live returns.
Operational risks include connection failures, stale data, software errors and compromised access credentials. Permissions should match the bot’s tasks, and activity and open positions need monitoring. Stopping the software may stop new instructions while leaving already accepted orders and positions active.