Long gone is the time when only banks and private institutions could trade the Forex market.
Now, individuals have access to trade their own money, and lots of it. The exchange of foreign currencies has since been open to private investors, central banks like Bank of America, and several countries. But now with the introduction of the Expert Advisor trading systems, the smaller trader can now automate their trades like the big companies do.
The systems allow the user to set their own parameters and trading guidelines. The program consists of software that has been developed for a specific type of trading style, not everyone trades the same. Some spot trade, some trade big, some hedge and so on and so forth. The developers of these types of software take into consideration any nuances of Forex trading as well as being aware that the market is trading 24 hours a day, even during weekends.
Without these types of systems in place, the trader would have to monitor the pair that is being trades on a constant basis along with monitoring opening and closing times which is almost impossible to keep up with. By using the Expert advisors, a trader can setup trading signals to make life a bit easier such as a type of order, stop loss, trade entry, news tickers etc.
Some of the key benefits of using an automated trading system is that it gives the trader full control, but cuts out the emotional bond a trader has with his money… making the temptation to trade on a whim a lot less likely. This takes the guesswork out of trading if the trader implements the right trading signals for this trading style.
The EA is a mathematical algorithm and it performs solely on formulas, so if the EA doesn’t perform like it should it can be changed, augmented and tweaked until the trader finds the recipe for success that they are looking for. Then, this process is repeated constantly to achieve a money-making strategy.
Trading also involves the trends of the market, be it long-term or short- term. These trends play a big role in the amount of trades that a trader is involved in. The EA, if setup correctly, will take these trends in-stride and make the trades accordingly, minimizing the drawdown or losing trades. Using historical data, traders can analyze and test their trading theories and strategies, some EA’s have a built-in function to record such data.
Almost every expert advisor system being developed now is made using the MetaTrader 4 platform since it provides reliable historical data that you can download from their site or any other, Multilanguage support, solid and user- friendly interface.
However – regardless of their complexity and capabilities – forex robots do not offer a one stop solution for instant profitable trading.
What Are Forex Robots?
A forex robot is a specialized program/software, which generates trading signals via mathematical algorithms that use technical indicators.
Some FX robots merely deliver these signals to traders. Others can act on them. It is this latter variant that is truly deserving of the “robot” name.
Having a piece of software do all the hard trading work for you certainly sounds tempting. All you really have to do is to go about your life and scoop up the profits when you feel like it.
That’s not how automated trading works. There are quite a few peddlers of such systems out there, who would prefer that you think that way about Fx robots. On this page however, we aim to discuss serious and viable auto trading systems. Such systems require constant tweaking and human supervision.
The real question is: do these FX robots work and how do they go about making decisions in your stead?
How Do Forex Robots Work?
Expert Advisors (EAs)
MetaQuotes’ MetaTrader 4 (MT4) is the “home” platform of forex robots called Expert Advisors (EAs).
EAs use an endless variety of technical indicators and custom scripts to derive trading signals and to act on them. Anyone can code EAs directly through the trading platform. The programming language used to this end is MQL 4 (MetaQuotes Language v. 4).
There is a vibrant market place where traders and programmers buy and sell the best performing EAs.
Top forex robots are well capable of scanning an ungodly amount of charts. Through the technical indicators they use, they then find trading opportunities.
Once it identifies such an opportunity, the robot can recommend it to the trader. It may also act on it, opening a position according to a set of preprogrammed parameters.
Throughout both operational stages, the limitations of the robot/EA are painfully obvious.
Experience has shown that automated trading only really works within a tight range. Also, the presence of a well defined trend is a major plus. Auto trading profits generally only amount to a few pips. Provided the conditions are right, forex scalping robots can be quite successful.
Because of these shortcomings however, large price swings can wipe out all profits in a heartbeat.
Choppy markets and negative trends are the arch enemies of profitable auto trading.
It is therefore imperative that the user of the robot should find a trend of proper direction and strength, before handing over the reins to the algorithmic “brain”.
Does Automation Really Work?
It is by no means easy or simple to create forex robots that work. Programmers pour countless hours and tons of effort into building such a piece of software. The sheer number of variables it has to juggle makes it clear that this is no simple exercise.
With that in mind, the very idea of a free trading robot that works, quickly becomes implausible.
That said, the actual efficiency of a working forex robot is quite unimpressive. Furthermore, authorities consider such automated traders to be unreliable novelties at best and scams at worst.
That is probably the reason why you will not find a serious FX publication promoting forex robots.
The forex robots industry itself is not conducive to trust. The peddlers of various trading bots do their best to discredit their competitors. It is a bit of a Wild West out there, and the winners are seldom the traders who purchase forex robots.
Your best bet to find a working forex robot is therefore to pore through feedback provided by actual users. Make sure that you are dealing with genuine feedback. Forex robot creators have an uncanny knack for faking user reviews.
Genuine forex robots always require a great deal of user input. What that means is that the ideal user is far from being a clueless beginner. He/she needs to fully understand the market conditions in which his/her robot works. The bot is only supposed to take the repetitive workload off the shoulders of the user. It cannot be the “smarter” party .
If that is what you expect of it, you are certain to be disappointed.
Bespoke Robot Strategy – From You
You then have to be able to set your FX robot to properly execute your vision. Once you have accomplished that, you need to keep an eye on the market/fundamentals, and another on your robot, continuously tweaking its settings. Shutting it down altogether and devising a radically different approach is also often warranted.
Forex robots that dangle a “fire-and-forget” deal are always scams. No one will sell you a forex robot capable of racking up untold profits on autopilot, for a handful of bucks.
That sounds too good to be true and indeed: it is.
The bottom line: do not expect much of your robot and know that you will have to do a lot of work even while auto trading.
Steer clear of free forex robots. The same goes for all deals which are too good to be true.
Pros And Cons
The advantages of forex robots are clear. If you have a mechanically repetitive trading strategy set up, that actually works, you will be able to have your robot trade for you 24/7.
FX robots take the mechanical work out of the forex trading equation. They cannot however help you any further.
They cannot come up with strategies of their own and therefore they cannot adapt to changing market conditions.
Successful forex trading requires skill, intuition an analytical approach and knowledge. Forex robots possess none of those attributes.
All auto traders, even the best forex robots in the world, function based on technical analysis. By definition, technical analysis uses past data to try to draw conclusions concerning future price swings.
Historical Forex Data
Any broker will be quick to tell you in the fine print: past data is not indicative of future performance.
As mentioned, the forex robot market is a genuine Wild West. Actors pull no punches and spare no tricks to make the sale.
One trick that seemingly legitimate sellers of forex robots like to turn to, is the process of picking out the best backtest from pools of hundreds or thousands. They then present that backtest as the outcome the buyer of the “system” can expect.
So the FX robot that caught your fancy is backtested…that probably does not mean anything at all.
Forex Robot Scams
The forex robot industry is fertile ground for all sorts of scams. It has always been that way, and it will probably continue on that same path.
The semi-legitimate nature of the very idea of an automated trader leaves plenty of room for such shady shenanigans.
How can you tell that a forex robot is a scam?
- – Its vendor offers it for free. No one will put the work and the time (possibly money too) into the creation of a robot to then offer it for free.
- – It guarantees profits. No one can guarantee anything when it comes to automated trading.
- – The robot is so advanced that it can come up with its own strategies. This is simply not possible.
- – Apparently, the robot works based on some super-advanced technology. This used to be a trick scammers loved to pull back in the days of the binary option auto trading scams.
There are always gullible people out there, and the scammers bank on being able to fool at least some of them.
- – The price of the robot is reasonable (e.g. in the $20-$100 range). This makes no sense. No one is going to sell you a capable forex robot for that much.
- – The seller claims that the robot is a turn-on-and-forget, long term solution. Most working forex robots are scalpers, because automated trading tends to do very poorly over the long run.
Forex robots use technical analysis. As a result of that, they are seriously limited in what they can accomplish.
To be able to use a robot to your advantage, you probably need to be a skilled trader, as well as a skilled programmer.
That said, there are legitimate automated trading solutions available. Forex robots that work however always require continuous human involvement.
If you take a quick look at some of the forex robot forums, you will be able to tell which automated traders are indeed legitimate. You will also see community members there discuss various setups for their FX robots.
These setups sum up the automated trading conundrum. The source of the winning strategy is the trader. Forex robots can only alleviate the mechanical workload. There is not much they can add to profitability beyond that…