Some Say They are the Answer to All Trading Woes – You Decide After Reading our Guide to Forex Robots
When you do any kind of research relating to Forex trading robots you’ll be amazed at the range of opinions you can find online. Some think they are the best thing since sliced bread, while other traders consider them to be a lazy way of trading. There are some traders who are happy to let an automated system take care of all their trading decisions while others prefer a more hands on approach. We prefer to take a more balanced view and are going to be sharing the good and bad points of this new kid on the Forex trading block, also known as autotrading bots. When you’ve finished reading what we’ve got to say you’ll be in a position to weigh it all up for yourself and decide whether you want to take advantage of one of the top Forex robots available. We’ll start with an introduction.
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A brief intro to Forex robots – What they are and how they work
Even the best financial wizard isn’t going to become a successful Forex trader overnight. It takes a lot of time and patience and the ability to absorb a certain amount of financial knowledge. It also requires a trader to follow world news and economics and the movements of the currency markets. All of this means sitting at a computer for long periods of time. Without this effort you will ultimately be unsuccessful because Forex trading requires more than simply luck. There is, however, a way to reduce the long hours of learning and analysis, with what has become a very popular tool known as an Expert Advisor (EA), or Forex trading robot.
An FX autotrading system uses a set of criteria, that are based mostly on technical analysis, to automatically make trades on behalf of a trader. This automation of the trading process allows traders to get on with other things, rather than constantly worrying about the comings and goings of the currency markets.
An FX robot is a piece of software or algorithm that does all the legwork including looking for profitable trades to participate in and then placing the order, or sending an alert to a trader so they can decide for themselves whether to place an order. There are a number of pre-set parameters or trading strategies the software takes into account before placing an order and advising the trader what it has done, or letting the trader know about the opportunity so they can make their own decision. Much like any other piece of software, a trading robot is very efficient, both in watching the various currency movements, looking for trends and then placing an order without any human emotion to get in the way.
You may now be wondering what the advantages are, so let’s give you a few examples before we go any further.
The advantages of automated Forex trading
You may already have decided you quite like the idea of Forex trading, but if you’re still looking for valid reasons to jump onboard let’s give you some of the benefits you can expect to enjoy.
You’ll be in a better position to maintain a level of consistency – In order to be successful in the world of Forex trading you’ll be required to show a certain amount of discipline. It requires focus and consistency, because you aren’t going to be hitting the winning trade every time. If you find it difficult to keep centered, especially after a few losses or a run of good trades, you might find the assistance of a trading robot very helpful. Robots have no issues with emotion, so it’s not going to be tempted to skip the next trade and possibly miss out on a winner, and it’s not going to get carried away either and place a trade at every opportunity, even when it probably shouldn’t. A Forex trading robot has a plan and sticks with it 100% of the time. Unless, that is, its parameters are changed by a human.
A trading robot can respond much quicker than a human – Every second counts when it comes to trading Forex, and a computer program is able to react far quicker to changing conditions than a human. Immediately the set of criteria are met the robot will act and create an order. There is no delay between analysis, reaction and execution. It can be very disappointing to miss out on a profitable opportunity because the brain wasn’t able to instruct the fingers to move quick enough.
Robots are experts at multitasking – By using an automated trading system a trader is able to trade using a number of different strategies across a range of different accounts. Thereby allowing risk to be spread across a number of different instruments, as well as enabling the trader to hedge against losing positions. Trading software is able to respond quickly and place an order in milliseconds, whereas a human is likely to take several minutes.
Forex trading robots aren’t ruled by their heart – A big stumbling block for many traders is overcoming their emotions, especially in the beginning. As long as the conditions are met an FX trading robot will react without hesitation. It will never question a decision and is not troubled by nerves. It can also help the over enthusiastic trader, who has a tendency to try and take advantage of every trading opportunity. As long as the rules stay the same it will always make the best decision. The rules are followed to the letter and discipline will be maintained.
It certainly seems like the top Forex robots are amazing. Now you’re probably wondering whether there are any disadvantages. There aren’t too many, but they can make a considerable difference.
Mechanical failure – We’ve all been there, right in the middle of something when the screen freezes or you lose the internet connection. How frustrating it will be if that happens right in the middle of a profitable trade.
Regular monitoring is required – It is never advisable to leave the robot to get on with its business without a certain amount of monitoring. Every now and again you will need to check what is happening. You don’t need to sit and watch it 24 hours a day, otherwise what would be the point? There are a number of different factors that could end up with an order being duplicated, lost or placed incorrectly. Your computer or the robots server could crash. There could be a power outage or loss of connectivity.
The possibility of picking a scam robot – Sad to say, there are a number of automated trading systems that are absolutely useless. Day in day out we read of countless traders who have been fooled into signing up for an automated service that churns out nothing but useless, inaccurate and incorrect information. One way to check whether the system you’re considering is a scam is to read a selection of customer reviews. There aren’t enough hours in the day to read them all but it will be good to read a selection and understand the experiences of other traders. However, we should also add a word of warning. Not everything you read online will be true. It is relatively easy for the savvy robot developer to place fake reviews.
Trading robots shouldn’t be relied on 100% of the time – There is definitely a place in the Forex world for trading robots, but don’t be fooled into thinking they can take over completely from a human. A trading robot or Expert Advisor is an excellent tool to have in your trading arsenal but there is still an important place for human observation and your own research. Bots are sublime at basing decisions on past performance, but will fall down when it comes to thinking creatively or out of the box. An FX trading bot will be excellent at picking out positive trends and trading signals, but a human is much better at keeping up to date with the latest global news events and tracking current economic conditions.
Let’s consider the issue of trading robots objectively. If they are as good as some of their developers claim they are then everybody would be using them, and that clearly isn’t so. Everyone would be trading foreign currencies and nobody would ever need to go to work again. FX trading robots can be a useful addition, but generally only in the short term. Looking at their value over longer periods of time has shown they have a tendency to lose money.
Now you understand what it’s all about let’s see if we can help you find the best Forex trading robot.
Tips for finding the top Forex robots
You might be thinking that picking a name out of the hat is the best option, but it is actually easy to make your search a little more efficient. Once you’ve decided you like the idea of using an autotrading system there are a number of factors worth considering.
- Read some customer reviews – This is a great place to start and might even help whittle down your list of contenders to a more manageable number. However, bear in mind that some of the testimonials might not be quite what they seem, as it is relatively easy to post fakes reviews online. It’s also a good idea to check how long the Forex trading robots have been operational, with 2 years being the absolute minimum.
- Credibility of the robots claims – Some of the robot sites you visit will claim to achieve extremely high winning ratios, maybe even as much as 99%. Which is clearly unbelievable and fanciful thinking. The only reason such claims are made is to hoodwink new customers into signing up for the service. A common trick is for the Forex trading robots to use results based on simulated trading rather than real time trading. You’ll see what the results are based on usually hidden at the bottom of the results page in very small writing. Real time trading is obviously much different to a simulated trading environment which can be easily controlled. This allows the robot developer to manipulate the figures in order to paint a perfect picture. Real time trading is much more chaotic, uncontrollable, and unpredictable.
- Has the robot been back-tested? – Ideally, you want to pick an FX robot that has been back-tested, not just with a range of currency pairs, but also in a range of market conditions. If you want to understand how a trading program will function across a range of markets, back-testing is a way it can be done. The Forex market is constantly changing and can be influenced by a number of different things including important news and announcements. You don’t have to rely on the robot provider to back-test their own product either. It is perfectly feasible to undertake your own back-testing. Should the robot provider voice their objections to such a course of action then you’re better off walking away. The best automated trading service provider will be more than happy for you to test their system yourself.
- Limited order size – The best Forex robots should work equally well regardless of order size. It shouldn’t make any difference to the results whether the order size is 200, 20, or 5 lots. A Forex bot that suffers a reduction in profitability, or win/loss ratio is a clear indication of the system being useless.
- Check drawdown – This should be done on a per trade basis, as well as for consecutive ones. Traders all have their own preference for drawdown, so you really want one that will meet your own requirements.
You should now have a more balanced view of everything involved in using Forex trading robots, and be in a much better position to make your own informed decision. One final word on the matter. Don’t let an automated trading platform take over and do everything for you. It will take away all the fun and enjoyment that is part and parcel of Forex trading. There is a place for Forex robots but they can never be considered the be all and end all of Forex trading success.