Forex Robots cash in on the repetitive, technical analysis-based aspects of forex trading. Such aspects lend themselves well to automation. Profitable long-term FX trading is about much more than that, but forex robots (bots) or automated services can have their benefits.
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.
Limitations
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 task of managing multiple variables simultaneously makes it evident that this is no easy feat. However, the concept of a free trading robot that operates effectively quickly becomes implausible.
Although the actual efficacy of a working forex robot is unimpressive, authorities view these automated traders as unreliable novelties at best and fraudulent at worst.
Perhaps this is why reputable FX publications do not advertise forex robots.
Trading Experience
The forex robots industry itself is not conducive to trust. Providers of various trading bots attempt to discredit their competitors. The industry is a bit of a Wild West, and traders seldom profit from purchasing forex robots.
The best way to find a working forex robot is to read reviews from genuine users. Ensure that you are dealing with legitimate feedback as forex robot creators can fabricate user reviews.
Genuine forex robots require considerable user input. Therefore, the ideal user is not a beginner and must fully comprehend the market conditions in which the robot operates. The bot is only designed to alleviate the repetitive workload of the user and cannot outsmart them.
If you expect the forex robot to do more, you will inevitably be disappointed.
Bespoke Robot Strategy – Developed by You
You must be capable of programming your FX robot to execute your vision accurately.
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 apparently legitimate sellers of forex robots utilize is to select the best backtest from pools of hundreds or thousands, and present it as the expected outcome for the buyer of the “system”.
Therefore, just because the FX robot that caught your attention is backtested, it does not necessarily mean anything at all.
Forex Robot Scams
The forex robot industry is a fertile ground for various scams, and it has always been that way and will likely continue on that same path.
The semi-legitimate nature of the idea of an automated trader leaves plenty of room for shady shenanigans.
But how can you determine if a forex robot is a scam?
- – Its vendor offers it for free: nobody will put the time, effort, and possibly money into creating a robot and then giving it away for free.
- – It guarantees profits: nobody can guarantee anything when it comes to automated trading.
- – The robot is so advanced that it can develop its own strategies: this is impossible.
- – Supposedly, the robot operates based on some super-advanced technology: scammers used to love pulling this trick in the days of binary option auto trading scams.
There are always gullible people out there, and scammers rely on being able to deceive at least some of them. - – The price of the robot is reasonable (e.g.