When forex traders gain experience in making trades, they feel tempted to make automated trading systems or Forex robots do all the hard work for them. Using Forex bots has a number of advantages. For example, they do not permit market movements to sway their emotions as it often happens with human traders.
While there are a lot of positives, there are also a number of risks involved with using them, which is why serious Forex traders have to choose and use their robots with care.
FX Robot Defined
Forex robots are computer programs based on forex trading signals that help determine whether traders have a buy or sell currency pairs in a given situation. Traders can easily purchase FX robots online, and many of them are also available free of cost.
How Forex Robots Work
Forex traders use bots to cut the time consumed in researching markets and to make some easy profits. Robots are capable of doing several things that humans cannot. For instance, they can scan an unlimited number of charts in the shortest possible time. Also, they are equipped with parameters essential to making trading decisions.
Since they have trading signals implanted within them, they can easily determine whether it is the right time to enter or exit a trade. The best of them are even capable of identifying profitable trades even in unstable market conditions.
Are Forex Robots Reliable?
Forex traders will find several varieties of robots in the industry. These systems use a variety of algorithms to semi-automatically or automatically make profits.
While the idea of using robots is alluring, traders should understand that using robots is fraught with risks. As soon as a trader purchases a robot, he/she takes two basic types of risks:
- Bad Robot Risk – The robot may not be as good as its developer claims it is. So this means lost money and a lot of disappointment for the trader.
- Counterparty Risk – The bot might be a scam, sold by a cheat who will shortly disappear from the scene with the gullible trader’s money.
Our intention is not to denounce forex robots, but to point out the various risks of using them.
There are plenty of good automated trading algorithms out there, but they serve only those traders who do not rely 100% on them.
Here are a few facts about the reliability of Forex robots:
- Not all Forex robots are what traders would like them to be.
- A few governments consider robots to be scams.
- Not a single article in a reliable news sources such as Wall Street Journal or Forbes promotes the use of robots.
- Several investors have lost a lot of money because they trusted free Forex robots.
- Although capable of scanning unlimited charts, they can still churn out unreliable information.
- Although highly sophisticated and based on the latest technology, they are still incapable of creative thinking and imagination. They can just perform as they are programmed to.
- Virus programs and hackers may reduce the performance of robots.
If you must buy a robot, do so only after reading a number of user testimonials and reviews online. And after buying one, you should avoid depending on it fully to make your trading decisions. Becoming a successful trader requires a lot of market observation, analysis, and research. Only humans, and not robots, are capable of keeping up with the latest happenings, analyzing them, and making predictions.
Traders should also be wary of developers who claim that their robots can help them make hundreds and thousands of dollars in trading profits. The simple truth is that robots, by themselves, cannot make any money for traders. If such robots truly existed, nobody would need to work for a living. They would just need to use these robots to make a lot of money in forex trading.
If you want to become a successful trader, you need skill, expertise, and knowledge, along with the ability to think analytically. Robots cannot function in such a manner, which means that even the best robot is no substitute for an experienced and skillful trader.
Automated Forex Trading Systems – Pros and Cons
A Forex robot is actually an automated trading system, which also goes under the names of mechanical trading, automated trading, system trading, or algorithmic trading. To use an automated trading system, a trader has to link the software to a broker and write rules in the proprietary language of the broker’s software platform.
Automated trading comes with the following advantages:
- Emotion Free Trading – Emotions cannot bother an automated trading system the way they can bother a human. If the criteria are met, the trade order gets automatically executed, leaving traders no opportunity to question the trade or to hesitate in purchasing it. Automated trading, therefore, is beneficial to traders who are afraid to take the plunge.
- Disciplined Trading – In automated trading, trade rules are established in advance and trade orders are executed automatically. Thus, discipline is established in trading, eliminating possibilities of traders getting afraid of losses or attempting to make more profits than possible. Automated trading ensures that trading plans are followed to the letter.
- No Human Error – There is no room for human errors in automated trading. For example, traders who want to buy 100 shares may enter the number incorrectly as 1000 shares in manual trading. But this just doesn’t happen in automated trading.
- Faster Order Entries – Automated systems prevent trades from going beyond stop-loss levels or reaching the profit targets because of lack of time to enter orders. They are capable of generating orders the instant the criteria are met.
- Diversified Trading – Traders can use automated systems to use multiple trading strategies or operate multiple trading accounts simultaneously. Thus, they can spread their risks across multiple instruments. While this is impossible for human traders to accomplish, an automated system can get it done in milliseconds. Automated trading systems can search for the best opportunities across a variety of markets and generate trade orders.
Automated systems come with disadvantages too:
- Technical Errors – Automated systems, though sophisticated, are not infallible. Trade orders are saved on computers, not servers. In case of a severed Internet connection, the order will just not be sent, leading to a loss. Discrepancies may also exist between real trades and theoretical trades.
- Not Really Automated – You just cannot leave a robot to function on its own. You cannot just switch on your computer and expect the robot to do all your work for you.
This is because your robot will stop working in case of power loss, lost Internet connection, crashed computers, and technical failures. An automated trading system may experience an anomaly, resulting in duplicate orders, missing orders, or wrong orders. You have to monitor it carefully to prevent all this from happening.
How to Find the Best FX Robots in 2023
The online trading industry is full of unscrupulous individuals and companies claiming to sell robots that can make hundreds and thousands of dollars in profits for you as you sleep. If you hear something like this while searching for the best FX robot in 2023, you must understand that robots like these just don’t exist.
So how do you identify the genuine robots from the fake ones? Here are key tips that will help you.
- Ask Questions – Do not hesitate to clarify all your doubts with the developer. If the company fails to answer your questions or appears evasive, avoid it like the plague. If you buy a robot without first finding out everything about it, you may lose your money.
- Research the Company – Research the developer of the FX robot. Study the website thoroughly and check out the terms and conditions page.
- Reviews and Testimonials – If the FX robot does not have any user reviews or testimonials, stay away from it. Never purchase a robot that nobody has ever heard of or reviewed. It is most likely to be a scam.
- Trial Period – Is the developer willing to give you a free trial before you part with your money? If not, you don’t have to do business with that developer. Usually, scam companies want you to pay the entire amount without the benefit of a free trial.
If you are new trader who still has a lot to learn about Forex trading, you shouldn’t even be thinking about automated trading. You should be investing your time and energy in getting educated. We have reviewed and rated a number of top Forex brokers for 2023, who offer high-quality educational material to help traders learn everything about making successful trades. We suggest signing up at these brokers and opening a demo account.
Even if you are a professional FX trader with several years of experience, you have to be careful about using a robot. Even if you do buy a robot, you cannot let it do your work for you while you relax. The only thing a successful trader has to rely on is his/her own knowledge and experience, not a system based on codes and algorithms.