For some traders, automated trading, or trading with the help of robots, is an absolute dream. However, there are those that consider it a very lazy way of trading. Whichever side of the fence you decide to stand, there is no arguing that a large number of people choose to trade this way, so we thought it was time to do some investigating. We always like to tow the middle line and look at not just the advantages but the disadvantages too. In this way, we are able to give our readers a balanced view of the latest Forex trading ideas, and then it’s up to you to decide for yourself. How about we start with a brief introduction?
Recommended Forex Robots
Automated Forex trading is the new kid on the block – But what is it?
In order to become successful in the Forex trading world, it will take a certain amount of time and patience. A careful eye needs to be kept of the world in general, but in particular global economics and news, including the movements of various currency markets. In order to do it properly it could take up hours of your time, but it happens to be a vital part of the whole experience. Especially if you want it to be a profitable one. But there is light at the end of the tunnel. A new tool has recently be introduced to the industry and it is known as a Forex robot, Forex bot, or it is often called an Expert Advisor.
In today’s fast-paced world, Forex autotrading has become very popular, because it allows traders to get with other things, while at the same time participate in Forex trading. Automated Forex trading uses a set of criteria that instructs a computer to execute trades on behalf of a real life trader. The trader has to do nothing, once the criteria have been set, apart from getting on with their everyday life. Automated trading involves the use of a tool which is known as an FX robot or FX bot. Which is simply a computer program or algorithm. The program decides when to place an order by looking for profitable opportunities. One of the benefits of using a Forex robot is that it is not swayed by human emotion. It is also much more efficient at watching the various movements.
Now you understand a bit more about this particular way of trading it’s time to consider how you can find the best Forex robots.
Tips for picking the best Forex robots
When it comes to choosing the best automated trading robot there are a number of factors to take into consideration.
- Live trading results – There are hundreds, possibly thousands, of FX robots to choose from, many of which promise winning ratios that are clearly unattainable. There is no way even the most complex and technical software can correctly predict the currency markets 99% of the time. So straight away, those that boast of such amazing success are the first to be tossed out the window. When a robot boasts of such fabulous results it is often the case they are based on simulated trading, rather than the real marketplace. It usually admits this fact somewhere on the robot’s website but is often so small it can be easily missed. Real-time trading is very different to the virtual world, and can sometimes be very chaotic and in fact rather unpredictable. A simulated trading environment is far easier to control and the figures can be manipulated to paint a much better picture.
- Backtesting – You should always look out for Forex bots that have been back tested on a variety of currency pairs. Also, those that have been tested across a range of market conditions. This will mean you get a clear understanding of how the program will perform when there is both high and low volatility and during news events and important announcements. It should also indicate possible risk and reward, wins, losses and the maximum drawdown. The best Forex robots will have no issue if you’d prefer to undertake the back testing yourself. If, however, they seem a bit reticent then it’s likely the particular robot is not worth your time.
- Limitations on order size – The automated FX trading system should be able to cope with a range of order sizes. There are certain systems that work perfectly well if you stay with a certain order size, but change this and suddenly performance is sadly lacking. The best FX robots will be those that work equally well regardless of order size. Should there also be a decrease in profitability or win/loss ratio then the system really isn’t as good as it could be.
- Drawdown – Another factor to bear in mind is drawdown. It is preferable for it to be on a per trade basis as well as consecutive ones. Traders each have their own preferences. For some, it might be 50%, but it could also be less. Check the FX robot meets your drawdown needs.
- Credibility of the system – One final step to take is to do some research and read the latest customer reviews and testimonials. You might also want to check how long the system has been available. 2 years is a good guideline. Performing this type of research is going to pay off in the long run.
Now we’ve whet your appetite it’s time to consider some of the advantages.
The benefits of using Forex robots
We may already have peaked your interest in making use of Forex trading robots, but for those of you who are still umming and aahing let’s share some of the worthy benefits.
Maintaining a level of consistency – For us mere mortals Forex trading can be a bit of a roller coaster ride, and this makes it very difficult to be disciplined and maintain a level of consistency. Both of which are vital. It can be very difficult to stay focused, particularly when you’ve suffered a run of bad trades. Unfortunately, losses are all part of trading and a trader has to be able to pick themselves up and get on with business. A robot doesn’t have such a problem. It isn’t going to be tempted to miss the next trade and possibly miss out on a winner. Cold, hard data is all it relies on to make its decisions.
Swifter response times – When it comes to Forex trading every second counts because the markets can change so quickly. Therefore it is important to be able to react to such changes and quickly make a decision. As soon as the right conditions are met an FX trading robot will go ahead and generate an order. There is no time delay, as a computer doesn’t have to wait for its brain and fingers to communicate.
Multitasking – A computer program is able to do a number of different things, all at the same time. Which means a trader can trade using a number of different strategies, across a range of accounts. Risk can be spread across a range of instruments and there is also the opportunity to hedge against possible losing positions. Computer software is far more efficient than a human at responding to a change in market and can place an order in a fraction of a second.
Human emotion is completely removed – Letting emotions rule your trading decisions is possibly one of the biggest hurdles for beginners to overcome. An automated FX trading robot has no such problem. Provided the requirements are met it will place the order. There will be no hesitation, and it most certainly won’t question its decision, and it won’t feel nervous or overconfident either. It is also of benefit to traders who have a tendency to trade at every possible opportunity. The rules a robot follows will always be the same.
Are there any disadvantages? Well, actually there are, but only a couple.
Mechanical failure – We’ve all experienced those frustrating times when you’re right in the middle of something and the internet fails or your screen has frozen. Unfortunately, this can still happen even with the best automated trading system.
You shouldn’t just leave the program to get on with it – A certain level of monitoring is still required. We’re not suggesting you have to sit and watch what it is doing 24 hours a day, otherwise what would be the point of using an automated system. You will, however, have to check up on it every now and again. The fact your computer may crash, lose its power or suffer a loss of connectivity are valid reasons for keeping an eye it. After all, you don’t want to find an order has gone missing, a duplicate has occurred, or an order has gone completely wrong.
So there you have it. Both sides of the automated Forex trading argument, now it’s up to you to decide. One last word on the subject is to remind you that Forex trading can be fun and exciting. Don’t let an automated program take that away completely, and good luck with your Forex trading endeavors.