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To answer the question that is the title of this article, several elements should be considered to clarify what is really meant by the question. To begin with, a typical forex trading robot does work in that they will automatically initiate and trade forex positions for you based on a set of programmed criteria.
Nevertheless, whether the robot program actually trades profitably in the forex market depends in large part on the price action observed in the market, as well as on the specific parameters and trading rules that are programmed into the FX robot software by its developers.
What is an Automated Forex Trading Robot?
Before continuing, a definition of what a forex trading robot is would seem appropriate. It probably first makes sense to clarify what an auto trading robot is not. It is not a physical and mechanical robot that sits in front of your computer and trades forex for you.
A FX robot is an automated robot trading system, which consists of a software application programmed with a set of rules and parameters that is designed specifically to initiate and liquidate trades on the forex market using some method of electronic trading automation.
Many automated forex robots take the form of so-called Expert Advisors or EAs that operate within the popular MetaTrader online forex trading platform to execute transactions. These forex trading systems are known as Expert Advisors because they “advise” the MetaTrader monitoring software — and the trader using it — whenever they are initiating and liquidating positions in their account using the MetaTrader software.
Why Traders Use Forex Trading Robots
FX Robots and Expert Advisors’ main goal is to make the trader operating them money in the forex market automatically and without the intervention of the trader. In other words, the robot or Expert Advisor initiates and liquidates trades without the trader having to sit at the computer or do anything manually.
Forex robots can be effective in finding optimum entry and exit points for trades, calculating ideal position sizes, and executing transactions according to the rules in a pre-determined trading plan.
Depending on the risk level the trader is willing to assume, most forex trading robots can initiate a position according to a set of parameters and signals that are set by the trader based on one or more technical indicators and exchange rate levels achieved in the forex market.
How Do Forex Trading Robots Work?
Most forex robot trader software is based on the technical analysis of currency market exchange rates and generally works in a similar manner, regardless of which type of robot trading system the trader has purchased.
Buy and sell signals are generated by the FX robot depending on market conditions and technical signals based on past and present levels of the exchange rate, along with the particular technical parameters chosen by the trader which are often adjustable.
The result is that the trading robot generates a buy or sell signal when all the relevant market factors and other trading conditions in the trader’s trading plan have been met.
While virtually all forex robot systems currently on the market have default settings, these settings can be adjusted to meet the risk and capital requirements of each individual trader using the software.
The following screenshot image shows a sample Expert Advisor called MarketTracker running in MetaTrader 4.
Figure 1: Screenshot image of MarketTrader Expert Advisor running in MetaTrader 4. The white text between the horizontal red lines in the upper left hand region shows various trading parameters, such as the current stop loss level, the number of currently open orders, the target stop loss, the next lot size to be traded, etc. The red and blue arrows superimposed over the price action show where positions have been initiated, and the white text represents what the outcome was from a trading perspective in pips. The graph in the indicator box at the bottom of the image shows the evolution in the overall balance of the trading account in blue and the equity in the trading account in green over time.
Different Types of FX Trading Bots
While some trading robots are completely self-contained and run as stand-alone computer programs, others — such as the popular “Expert Advisors” that operate within MetaTrader — can work in conjunction with other forex market monitoring and trading software.
To use an MT4 robot, the user must first have a live funded trading account with a forex broker, download the MetaTrader 4 software to their computer and have a working version of the expert advisor software that can be used with the MT4 robot trading system. In many cases, a demo forex trading account can be used, allowing the trader to test the expert advisor software.
Self-contained packages typically offer a trading platform for automated robots which include a proprietary data stream and trading signal generator in most cases. This type of forex system trader is generally offered on a subscription basis, and the trader is charged a monthly fee.
Evaluating a Trading Robot’s Profitability
Regardless of the type of system used, some Internet research can clarify which are the best forex robots and how successful other people have been using the different types of robot software. Nevertheless, one must be aware that many reviews on forex trading systems are not genuine, and therefore often give an inaccurate account of the product’s profitability.
The optimum way to assess a system’s profitability and whether it will work for the fx trader is using a hands-on approach to see how suitable the software is for the trader’s needs. By downloading the trial software and learning how to perform a backtest in MetaTrader, the trader can arrive at a more accurate and educated evaluation of the potential profitability of any forex trading robot that they are considering purchasing.
To determine whether a particular trading robot will trade profitably, the system must be tested by back-testing with historical data using the default parameters to see if the system will produce positive results. The trader can also opt for paper trading the system within the market environment using a demo account, which is often provided by most online forex brokers.
In addition, most forex robot packages offer free trial subscriptions, a software demo package or a satisfaction-guaranteed purchase so the software can be tested before committing funds to a live account. The trader can then test the software, inputting their own parameters to determine if the robot will perform profitably with their trading plan.
Advantages of using an Automated Forex Bot
Automated forex trading systems can be effective tools for determining optimum entry and exit points in the market, calculating the size of positions and executing trading plan transactions.
Depending on the level of risk the trader is willing to take, most forex systems will initiate trades according to an optimum set or pre-determined signals and parameters according to technical indicators and exchange levels in the market.
Some of the notable advantages of using a forex trading robot might include the following:
- Availability – FX trading systems are extremely easy to purchase and download and can be set up and in use within one hour.
- Automation – most forex trading robots offer fully automated systems, allowing the trader to concentrate on other activities while the “machine” trades tirelessly around the clock.
- Elimination of the Human Emotional Factor – human emotions can be extremely detrimental to the trading process for both novices and professionals. Automated trading eliminates this element which carries psychological pitfalls for all traders.
- Programmability – automated trading systems generally allow for full programmability, allowing the trader to adjust risk levels, profit levels, and other variables. Optimizing the automated forex system’s parameters to initiate and liquidate trades is one of the keys to increasing profitability when using these types of systems.
Virtually all auto traded forex systems are based on a technical analysis approach and usually work in a similar manner, regardless of which software package is chosen to purchase. Buy and sell signals are generated depending on market conditions, with the software interpreting the technical signals based on historical and present levels.
Once certain technical parameters are reached, a buy or sell signal is generated, and the robot software executes the trade. These technical parameters are often adjustable, allowing the trader to set their own levels to generate buy and sell trades.
Example of a Trade Using an Automated Forex System
As an example, let us suppose that a new high has been reached in the AUD/USD exchange rate. Depending on the configuration of the FX robot’s trading parameters and the nature of the trader’s trading plan, the forex system could have its criteria met to initiate a buy transaction. Once this occurs, the software determines an optimum entry level and position size.
Once the FX robot determines the entry level of the long position, it will typically issue a buy order, which would have the trader go long the AUD/USD exchange rate, either at an optimum price level or at the market as determined by the software’s trading parameters. Generally, the software already has determined the optimal place to take a profit and will enter a sell order at that level after the buy order has been filled.
At the same time, the software will automatically determine the level at which a stop-loss order must be entered to limit the trader’s risk exposure on the trade in the event that the market goes in the opposite direction after the initial position is established. Once either order is executed, the stop-loss or the take profit, the other order is automatically cancelled.
In the above example, the stop-loss order would be entered at the risk tolerance level that is usually determined by the trader. This is an adjustable parameter set by the trader per the level of risk they are willing to take on any given trade.
How Effective are Forex Trading Robots?
Despite the pie-in-the-sky claims that forex trading software manufacturers make and the promise of profitable trades, according to the federal government, most of these software packages are a scam.
Most credible business publications, such as the Wall Street Journal or Financial Times, will not even write about them, except perhaps to expose them to the general public as scams.
While trading robots are often advertised with claims and testimonials from many people, many of these claims have been proven to be false, and a great number of investors have lost money using these automatic trading robots. Some people have even lost their entire trading accounts by employing an FX robot.
Even though a trading bot can scan a multitude of charts and information, many times the software will respond to incorrect information or false price spikes that a real trader would probably filter out. While the robot can perform many highly sophisticated tasks, the software is still not capable of creative thinking or exercising truly good judgment. Forex robot trading software is presently limited to initiating trades based on past performance, its current programming and its parameters.
In addition to the limitations previously described, a typical FX trading system does not take into account fundamental or intermarket analysis. And this could cause the trader to lose considerable sums of money in the event of an extraordinary geopolitical or economic event. Nevertheless, a seasoned trader could use an automatic system to gauge technical changes and base some of their trades on the signals generated.
Trading is a human endeavor and markets movements reflect mass human psychology. If making profitable trades was as easy as buying a trading system and letting it trade, then everyone would be sitting at home with their trading bots making a bundle, which is simply not the case. Even professionals that employ complicated algorithms with much more sophisticated computers to trade do not discount the human element and monitor their algorithmic trading programs very carefully.
While these automated trading programs can be somewhat profitable at times, in the long run the only people that consistently make money from automated forex trading software are the developers themselves. Also, many of these programs scalp the market, which means that they take small profits and set a wide stop loss, which can be disastrous for a trading account during a losing streak.
Another consideration is that forex market conditions change constantly and can be manipulated by the activities of central banks and large traders. A software program cannot take into consideration all of the factors that influence the direction of an exchange rate regardless of how many technical indicators it can monitor.
While many people want to make money trading effortlessly, investing in a forex trading robot could cost a trader much more than their original investment. With that said, a trading robot could be useful to a trader in that it could give the trader additional insight into the market. Still, believing that is can be a stand-alone trading unit that you can just set and forget about while it racks up trading profits, is a naïve pipe dream.
Conclusion – Trading Robots are Probably Not Worth the Risk
In conclusion, becoming a successful currency trader involves more than just installing MetaTrader, opening and funding an account at an online forex broker, and purchasing an Expert Advisor to trade for you.
Instead of risking money by buying a trading robot, a novice trader is usually much better off by investing in getting a deeper education about the forex market. Such things as learning about technical and fundamental analysis, developing their trade plan, and trading in a demo account to test their trade ideas until they manage to find a reasonably profitable strategy they can employ in the markets.
Trading in the spot forex market offers no true shortcuts, which is the reason that you will seldom hear about a forex millionaire using a purely automated system, perhaps with the notable exception of the developers of the software that may become millionaires by selling their systems to the public.
Such robot software developers are generally playing on the greed and laziness of the general public. It should be common sense to think that, if their systems’ were truly superior, then they would not be selling that intellectual property, but rather using it for themselves to extract millions from the market.
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Forex: nothing is set in stone
Before using a strategy, one needs to understand the conditions under which the market is operating
If you’re in the market only for earning money, you will lose yours. To get something from the market, you need to know how to develop simultaneously with it. When there’s a change in conditions, those strategies which used to be profitable are no longer efficient. Trading robots are a bright illustration of that idea. They are very efficient when analysed based on history, but in reality they don’t prove to be as good and the use of them often results in deposit losses. Just because conditions have changed. The market is developing and you aren’t. So, is it really a big surprise to see your money flow from your pocket into someone else’s one?
The market is constantly changing, but it is still subject to economic laws. To understand the conditions you are in, you need to try to answer a few questions:
– what is the current economic cycle?
– is the economy slowing down or speeding up?
– what will central banks probably do?
The longer an economic cycle is, the higher the probability that it will end soon. A central bank may lower interest rates at the slightest threat of a GDP slowdown, which is a bearish factor for any currency. On the contrary, the acceleration of economy is a reason for tightening and consolidating a monetary policy. Why is fundamental analysis based on the principle that a strong economy means a strong currency? Because only a strong economy can afford high interest rates, which attract investors like a magnet. You won’t place your money in a bank at 5% if a neighbouring bank offers a rate of 10%, will you?
Looking at the dynamics of the US’s and Eurozone’s GDPs, we can easily understand why the euro had been actively growing against the USD in 2020 and why the situation reversed in 2020.
Eurozone’s and US’s GDP dynamics
Two years ago, the European economy was growing much faster that the US’s one but Donald Trump’s large-scale fiscal stimulus and trade wars changed the situation dramatically: US GDP accelerated while its European counterpart started losing ground. The divergence between the Fed’s and the ECB’s monetary policies and higher rates on US treasury yields consolidated the dollar against the euro. Investors saw that the US economy was stronger than the European one, but in 2020 the situation changed again.
The exhaustion of fiscal stimulus effect results in US GDP growth rates retuning from extremely high (almost 3% in 2020) to normal values (2 %). The States is ready to update the value of the longest recorded economic expansion while the inversion of the yield curve is signalling an upcoming recession. Under such conditions, the Fed is supposed to lower rates, which leads to the weakening of the dollar.
Economic cycles and Fed’s rate dynamics
If the EU economy could recover and the ECB started normalizing its monetary policy amidst those conditions, the rate of euro could grow. Alas! The currency bloc’s problems are aggravated by Brexit and trade wars. Britain and China account for an important share in demand for European goods that’s why these countries’ GDP slowdown gravely affects Germany and its neighbours. When the growth rates of the US and EU economies slow down, the consolidation of EUR/USD is more likely to take place.
So, if the years 2020 were those of a clear trend in the main currency pair, the year 2020 may make it fluctuate in a limited range. The “buy and hold” principle doesn’t work here and trading strategies based on recoveries are loss-making. On the contrary, those traders who are satisfied with moderate profits are in clover. They’ve managed to change with the market.
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Price chart of EURUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
Forex Automatic Trading Robots (EA) – 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?
Thread: What is Forex Robot?
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What is Forex Robot?
What is Forex Robot?
Forex-robot pros and cons?
Are you ready to file your trade deal with a Forex robot?
Trading robots are automatic or semiautomatic advisors, experts, and bots (sometimes they are called owls, rats) which are used for trading on exchanges and in particular on Forex. Robots are written in the MQL4/5 language.
They are classified into three types according to the mode of action:
According to the market strategy, advisors are divided into:
In addition, they can be automatic, when after configuring they do absolutely everything by themselves. And semiautomatic, when a trader himself opens a deal, and an advisor accompanies and closes it.
Why do traders use trading robots?
Certainly, for saving time. Once the advisor is written, configured, it will trade without the trader’s participation according to its work algorithm. Trader can only monitor its activities.
When using the special VSP server, a robot will be operating 24 hours a day that a real person can not do.
In addition, there is no problem in psychological terms. Since nerves are not wasted during dipping positions, because all responsibility is passed on the adviser.
Robots don’t get tired. Their operating time does not impact on the effectiveness.
The use of an expert should in no case be left unattended, since a robot may react inappropriately to the release of important political and economic news, and you can get into a huge drawdown instead of getting profit.
It is believed that all the bots siphon off. Actually it is not the fact. Another thing is that really good ones are expensive. But even if a trader buys an expensive robot, but at the same time money management is broken in the settings, then this wonderful advisor will siphon everything off.
It must be said that beginners on Forex like robots.
I’ve been through this myself. But after they twice considerably increased my deposits, and then siphoned everything off, I still can not recover, and I have no desire to get involved with advisors.
A forex robot is a software that can trade the markets like a human trader, thereby saving the owner the task of monitoring the markets and watching charts round the clock. Many so-called forex-robots are just inefficient contraptions that have flawed logic and hence ultimately lose money for their owners.
Very few trading software do a good job of trading the forex markets from a stochastic/probability perspective. Most of the people who design the trading robots being sold in the open market have no idea about the nature of and the microstructure of the forex markets. It is therefore not surprising that most of those contraptions lose money.
I do not subscribe to full automation of trading processes using trading robots, but I believe it is desirable for traders to go for partial automation of their trading processes and leave room for discretionary trading ( which I consider to be the best way to trade the forex and stock markets).
Forex robot also known as EA is an addon for metatrader.
The uses of an EA are many, it can provide and show any and all indicators on the chart, perform all the functions of the trading done by the trader or any combination of these. The use of an EA is sometimes to do something for the trader because there is no time or perhaps to dubble check something mathematically, personally i use these both.
The trader can have a professional make an EA for him or buy one that is already made. It can be as simple as “close all positions if equity = x or higher”, this would be a good idea if the trader has many positions on and wants to close his many trades in profit so he can begin again. Another one that i often use is to have the EA control my chart and positions when i sleep, the EA keeps track of what position is in profit and if there is enough profit the EA makes sure that that particular position stays in profit by moving the stop loss for me.
Some of the good things of using an EA are told above, some of the negatives would be that it costs a lot. I personally have had several made for me by a professional that only makes these. A full time programmer, buying that service costs a lot. But the price is what you pay for having the extra functionality, i can have even more freedom because of the EA’s that i use. Given the fact that i often trade on the h1 i could even have a completely different job and still trade at the same time live in the market, because of the EA.
It’s a question of price versus performance. Is it worth it? If you trade enough volume it is.
By simple basic Definition, A Forex Robot is a software created for the sole purpose of trading in place of a Forex exchange trader. These systems are very popular and has become an integral aspect of the Forex trading business. Forex Robots are very advanced systems and they can analyse, set SL and TP and then Open trades for a trader even when a trader is not allowed and the traders computer is even off. Robots makes use of alogrithms programmed into it by the developers.
Pros : i.e advantages of Robots – The Robots major advantages is that it gives a trader space because it works on their own.
Robots arent humans and on average these robotsdo not make any mistakes that is connected to emotions.
Cons : i.e disadvantages of Forex Robots – They are simply compter programs can can make mistakes and cause failure.
Also at some critical points, Robots are cannot save a trader from some very huge losses that can be caused by extreme Market Volatility.
Forex Rbots are expensive
I personally do not actually believe in Forex Robots, they can work well and make profits, But i prefer manual trading because i believe that i should be in charge of trade decisions that i am making in this business.
Thread closed as the contest has ended..
Well, i have never seen some Expert Advisor can making consistent profit for each months. The best thing is who has create that Expert Advisor it selves promote that they Expert Advisor can making consistent monthly income. Not all Expert Advisor is good to be use for a traders moreover if the trader it selves is only use Expert Advisor from other trader means not create it. Profesional trader who has create the Expert Advisor will build it basic on their trading characteristic and that means not all traders can follow it, even with complicated setting , i am not sure other trader can follow their Expert Advisor very well.
Now let’s we try to think the logic of trading in real life.
You have a store then some manufacturers come to offer some items for sale in your store. Some of the items they leave are:
2 ton of Rice.
1 ton of Sugar.
100 packets of Snacks.
In the first month, you can sell them all.
In the second month, you only sell Rice.
In the third month, you do not sell anything because of a disaster in your store.
Or if you are manufacturers of some product. You can made 1000 item for a month, in the first and second month you can sell it all. Then in the third month, you can’t sell one item because you lose with the competitor who has made more good quality item than yours. So, the point is this is a business, we must accept the risk of loss in any business around the world. We can’t predict the future, get consistent profit is almost impossible. Even in forex business, have a good trading rules is not guarantee we can made a consistent profit income.
It’s good or not using the Expert Advisor is depend on your selves, how much big your trading knowledge and experience is determine your future is it will success having good career in this business or not. Your skill to control the Expert Adcisor is the key, it will be make you making much profit or will loss everything because using Expert Advisor is more risky than trading manually.
A robot is defined as something or an object that is programmed to achieve certain results that the author or inventor has in mind, with this definition, it means that when someone builds a robot or an expert advisor to trade in the market, him only will understand it to the extent of earning well from it, whenever we get these stuff for free it means that the user manual that is meant to explain everything will be missing, this is why going on the internet to download anything you find to trade is a bad idea. It will only work if you personally know the developer or maybe someone that subscribed for the service gave it to you.
Robots are meant to give us easy ways to trade in the forex market but some traders have taken this too far by looking for the holy grail that we all definitely know cannot be found anywhere.
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