Forex Automatic Trading Robots – Things You Must Know Before Using Them
The popularity of forex automatic trading robots keeps increasing, in spite of the dubious returns generated by using them. If you’re interested in trading currencies, there’s more than a slight chance that at some point in your trading career you’ve considered buying one of the software advertised online as the greatest revolution in trading, the best robot that awes the pros and experts with its successes. There’s little merit to these ostentatious claims, but if you are intrigued by them, here are some things you must know before using or buying any of the forex automatic trading robots.
Forex robots are automated systems that enter trade orders in the place of a human trader. They are programmed to generate returns by the application of mathematical rules which are decided by their creators. In other words, the intelligence and skill of a forex robot is entirely dependant on its creator. The forex robots run the pre-programmed routine under all circumstances; they don’t change, revise, or adapt it to changing conditions in the market, but will attempt to cut losses based on the instructions provided to by the programmer.
The commands executed by the robot are based on the tools of technical analysis, but sophisticated programmers will also use back testing to optimize the results of their robots. This process can be automated itself, and involves tweaking of the program to ameliorate its performance with respect to maximum drawdown, the placing of stop-loss orders, and other aspects of money management.
What the programmers of these robots won’t tell you.
There are important problems with the logic behind the creation of the forex automatic trading robots, and the actual results generated by them. The first and obvious issue is the fact that the robots have never been tested in actual market conditions. In almost all cases, they are tested on historic data, and non-trade related problems, such as connectivity issues, or problems that originate from the broker which would not be reflected on market data, are ignored. For example, even the best robot will be useless if during some inevitable technical problem originating at your local ISP a brief blackout wipes out your account. Similarly, if, for whatever reason, spreads of your own broker widen to levels much greater than that prevailing in the vast majority of the market, even the best automated system will be useless. Only good money management methods, through the use of proper stop-loss orders, and preparation and willingness to admit and recognize losses can ensure survival against such periods.
The second issue is born of the fact that by using a forex automatic trading robot, you’re basically handing over the control of your finances to a machine that has no brain. It is programmed to run according to a set of rules at all times, and has no ability to adapt itself to changing circumstances, regardless of the severity and importance of the changes in question. This is perhaps the most important disadvantage of using a robot in the forex market where change is the only constant.
Finally, and in relation to the above, we should remember that the robots are only as smart as their creators. Do you really believe that the peddler selling you the robot is a market-busting genius at the level of a Warren Buffet, or George Soros, who, after all, have had their own fair share of disastrous trades over the years? If you don’t think that the peddler is that smart, then why do you expect rules written by him to beat the markets in a way that even the best traders with proven records have never been able to do?
Conclusion: What to seek in a forex robot?
We do not advise that you purchase any forex robot, since trading by using them, without understanding and knowing what you’re doing goes against all the basic principles of a successful trading career. The only kind of forex robot useful for you would be one which you could use to automate your own trading strategy, or one that you understand and are confident about, having examined the inner mechanism, and design of it. When you buy a forex automatic trading robot, you know close to nothing about why and how it performs, since even their creators don’t know why the particular combination on the basis of which the robot is operating is supposed to be creating good returns in the markets.
On the other hand, if you create your technical scheme and want to automate it, there’s nothing wrong with purchasing a forex API pack from a forex broker or API developer and using it for that purpose. But many of us lack the confidence and the experience necessary for creating and customizing these tools ourselves, which is why the robots are so popular on the market these days, advertised by extravagant claims, and hyperbole.
In short, the forex automatic trading robot is an alluring, great idea that promises a lot, but delivers little due to the random nature of price action in the financial markets. If in spite of all the information in this article you still have confidence that some of the robots out there deliver the incredible returns promised by their creators, consider the obvious. If the owners of these systems have achieved the Holy Grail of trading, why would they peddle it to you online for meager sums? They would not even need to advertise them, as financial institutions all over the world would compete with each other to acquire these products from them. Instead, large firms and broker ignore the robots and creators. Why won’t you do the same?
Forex Trading Robot
What is a 'Forex Trading Robot'
A forex trading robot is a computer program based on a set of forex trading signals that helps determine whether to buy or sell a currency pair at a given point in time. Forex? robots are designed to remove the psychological element of trading, which can be detrimental. While trading systems can be purchased online, traders should exercise caution when buying them this way.
Automated Forex Trading
Forex Signal System
BREAKING DOWN 'Forex Trading Robot'
Forex trading robots are automated software programs that generate trading signals. Most of these robots are built with MetaTrader, using the MQL scripting language, which lets traders generate trading signals or place orders and manage trades.
Automated forex trading robots are available for purchase over the Internet, but traders should exercise caution when buying any such trading system. Often times, companies will spring up overnight to sell trading systems with a money back guarantee before disappearing a few weeks later. These companies may cherry-pick their successful trades or use curve fitting to generate great results when backtesting a system, but are not legitimate systems for assessing risk and opportunity.
There is no such thing as a “holy grail” for trading systems, because if someone did develop a money making system that was fail proof, they would not want to share it with the general public. This is why institutional investors and hedge funds keep their “black box” trading programs under lock and key.
Developing Your Own Forex Trading Robot
Forex traders may want to consider developing their own automated trading systems rather than taking a risk on third-party forex trading robots.
The best way to get started is to open a demo account with a forex trading broker that supports MetaTrader and then start experimenting with developing MQL scripts. After developing a system that performs well when backesting, traders should apply the program to paper trading to test the effectiveness of the system in live environments. Unsuccessful programs can be tweaked, while successful programs can be ramped up with increasingly larger amounts of real capital.
In general, many traders try to develop automated trading systems based on their existing technical trading rules. Some such systems are more successful than others. An example might be a trader who watches for breakouts and has a specific strategy for determining a stop-loss and take-profit point. These rules could be easily modified to operate in an automated fashion rather than being manually executed. Traders should keep an eye on these systems to ensure that they’re working as expected and make adjustments when necessary.
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Forex robot scams encompass Expert Advisors (also famously known as EAs) and other automated trading systems.
What is a forex robot?
In the forex world, a “robot” is a program that strictly uses technical signals to enter into trades and lets the human sleep in a hammock on a beach while he “makes” money.
With a push of a button, the forex robot runs continuously, making trades signaled by mathematical algorithms applied to past price history.
In order words, they run automated mechanical systems, whether or not the user is in front of the computer or not.
The problem is that forex robots and their pre-wired thinking do not compensate for ever-changing market conditions.
Market behavior is dynamic, constantly moving in an infinite variation of three movements: up, down, or sideways.
Now, the scam isn’t the forex robot itself but how they are marketed. Scammers will often try to sell these robots and automated systems as the “holy grail” of trading, promising you’ll retire sometime next week.
And they sell them at “human affordable” prices ranging from $20 to $5000.
All right, stop. Collaborate and listen.
If the creator is making big bucks with the system, why would he/she try to sell it and share the profit?
And why for only $20?! You can barely get a decent meal at Chick-fil-A for you and your sweetums with $20!
The only real profit for these fraudulent people is the revenue generated from the sales of their forex “R2-D2s.”
The scammer will try to entice you with historical data and back-testing logs.
It’s back-tested!! It must work. And it’s only $20!! That’s less than a PS4 game!
All right, stop. Collaborate and listen. Again.
Sure, it might look highly profitable. However, in the forex market, there is no such thing as a consistent market. Conditions are changing all the time. The past has little effect on the future in a changing market.
We don’t know for certain that what happened in past will happen again in the future. There are too many variables to consider.
Plus, you don’t know if these scammers are making up the results anyways. They could just input random numbers into an excel file as most people wouldn’t bother checking if they are accurate or not.
Stay away from automated systems and robots until you become a master trader AND programmer.
Beginners know nothing about trading or how forex markets behave, so they will not understand how the robot works, what environments they are best suited for, or how to tweak and adjust the system.
It is best to actually learn how to trade consistently before you make the decision to let a program do it for you.
Think about it this way: Would you give a total stranger (with no brain to boot!) your hard earned money to invest without having a clue on what he/she was doing?
Forex robots can be a great tool, but let’s be real -there is no perfect “one” that will work in all environments, all the time.