Forex Robots and Automated Trading
Forex robots are automated systems that enter trade orders on behalf of the trader. They are programmed to identify entry and exit positions and to execute orders by the application of algorithms and mathematical rules.
The popularity of forex robots for automated trading keeps increasing. If you’re interested in trading currencies or other derivatives (though the vast majority of automated trading is designed to trade Forex) here are some things you must know before choosing your trading robot.
What a Forex Robot Does
The main purpose of a Forex robot is to make money trading on the Forex market without doing anything manually or having to sit at the computer; the traders just have to find the ideal settings for the software: currency pair, time frame, size of each single trade and percentage of the capital to use at any given moment.
The commands executed by the robots are tested on a back-testing basis, that is using historical data, in an effort to optimize the results and in case to make changes to the software algorithms and mathematical rules with respect to maximum drawdown, to the placing of stop-loss orders and to money management principles.
Robots are usually able to scan a significant number of charts and watching the price movements in all of them at the same time, which is something well beyond human capability. Then, as robots are programmed with parameters needed in making trade decisions, they decide when or when not to trade and execute entry and exit orders accordingly.
By following the best trend, they can maximize their profits and possibly eliminate chances of taking losses. As a basic rule, trading against the trend increases the chances of losses while trading with the trend maximizes profits, regardless of the trading system or software used to trade.
Some robots offer solutions to find profitable trades even in sideways market situations where the trend is not defined. They make some pips trading inside the tight range during the slowest forex market time.
The biggest advantage of a Forex Robot
The main reason for people losing money in trading in financial markets (whether it be in Forex, Stocks, Futures, Options or other derivatives) is because the majority of the traders are not disciplined and, as they come across a few losing trades, tend to trade outside of the planned strategy: instead of sticking to the trading system defined after weeks or even months of analysis and study, the undisciplined trader tends to overtrade or to erratically enter and exit positions in an attempt to recover the lost money and guess what… they lose even more money.
The greatest advantage of the trading robot is to follow the rules of trading strategy set out in the software itself without being influenced by the psychology of the human trader.
How to choose your Forex Robots?
All Forex robots promise to make profitable trades, robot merchants promote their robots by claiming their competitors’ are scams, some robots are even advertised with false testimonials, so the question is: how can you make sure that you are not buying a scam?
If you want to know how effective they really are, check out those websites that verify the trades and the performance of the robots, the most reputable being MyFxBook, FxBlue and MT4Live, plus some recent outsiders like ForexVerified.
There are also websites like http://www.tradingmatica.net/ and http://forexrobotsinblack.com/ which scan these independent verifying blogs and propose the best performing robots. Following these suggestions you are sure that the trades and the performance of the verified robots are truthful and not scams, which does not guarantee that you will make money but that you start in the right direction.
The way the automated trading software are verified by these websites solve also the problem of many robots being only back tested and not tested in real market conditions where the system may experience on-trade related problems, like connectivity issues and widening spreads.
Automated trading software, or robot, is not a guarantee to make money just sitting back on your chair, nevertheless by choosing “verified” robots you will be sure that the advertised trades and performance are truthful and reliable information, and this will put you one step (a big step) closer to successful trading.
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