What if a robot could trade currencies on your behalf? The notion of some automated system making infallible decisions is irresistible. Probably, every trader would love to delegate their work to a perfect machine.
Forex robots are advertised as tools for automated trades. But how accurate are their decisions? Can you watch your account balance grow without any participation? Not really. Here is why.
Definition of Forex Robots
These special pieces of software may be integrated into your platform. They are classified as automated trading systems. The purpose of FX robots, obviously, is to help you earn the profit.
To make decisions, they collect a range of signals. This allows them to enter, manage, and close trades without human participation. Also known as Expert Advisors (EAs), robots can be purchased or rented online. Currently, there is a wide choice of such systems.
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But think critically: is it really possible to make a fortune through robots? If this were the case, many of us would be millionaires. Still, successful traders are in the minority. There must be a catch.
As you may guess, accuracy is the obstacle. Forex automated systems can really trade for you, but you should not expect a windfall. Here is why.
Pros and Cons
EAs have their benefits and drawbacks. Despite all the technical advances, humanity is yet to see a system that makes flawless trades. With or without an EA, Forex is still risky. Learn about the typical caveats before adding a robot to your arsenal.
Overview of Benefits
Trading is a stressful occupation. If you want a safe investment, open a bank deposit. The interest will be meager, though. Where profits are high, risks are also significant. There are no exceptions to this rule.
The market may always move against you, contrary to your predictions. Accurate forecasting is challenging, and mistakes can be expensive. The foreign exchange is definitely not for the faint-hearted.
Emotions can disrupt any strategy. All too often, you may feel the urge to chase losses or base decisions on hope. Market analysis is not easy, but it is the only way to succeed. Forex trading robots can do it for you. They eliminate the psychological burden, so you will not need to fret.
Robots have no feelings. They just collect relevant data and make decisions accordingly. They are not driven by greed, panic, or excitement. EAs are more objective than humans – such is their nature.
Secondly, they can consider a broad range of data at once. Here, they will beat any human expert. Even in fluctuating markets, when the future looks dim, they may decipher the right direction. Other benefits include the following.
1. Trading 24/7
A robot can work around the clock. It never gets tired or unfocused.
2. Faster Work
EAs can analyze dozens of charts in seconds. Such speeds are unattainable for humans.
3. More Advanced Strategies
A robot can be programmed to pursue any strategy, even the most complex one. Human traders, on the other hand, should only use approaches they understand best. Many experts recommend keeping it simple, especially when you lack experience.
4. Easier Backtesting
Before applying a strategy, you need to check its validity. Traders should see whether the system is applicable to past price data. There is also forward testing, which checks validity for present conditions. Without automation, both tasks may be daunting.
5. Robots are for Everyone
You do not have to be an expert to use an EA. Just add it to your terminal, and let it do its work. Voila!
Overview of Drawbacks
Finding the right Forex robots for sale is not easy. Not all of them are equally useful. Some of them are sold by unscrupulous companies that just want your money. They post deceptive articles promising quick and easy money. Be wary of such offers: they are likely to mislead. No reputable company will guarantee stellar results.
The Internet gives crooks unlimited freedom. They use attractive ads to lure in naive buyers. Their robots may be useless or even harmful. Instead of growing your balance, they will deplete it.
Still, this does not mean that all FX robots are scams. Some systems are more effective than others. Devote some time to online research. Look for genuine customer feedback to identify trustworthy offers. Forex review sites are also helpful.
Problem with Non-Trending Markets
Olymp Trade Robots are most effective in clear market conditions when they see strong trends. When the market becomes turbulent, with frequent erratic changes, they struggle to cope.
Fundamental Analysis is a Challenge
EAs may be good at reading technical data. They can make accurate forecasts based on price history. However, media analysis is not their strength. There is simply too much to consider: economics, politics, and industry events. Humans can foresee future shocks, while robots will be oblivious to any unexpected threats. A quick reversal disrupts their performance.
Robots are designed to seek confirmation and convergence, which is good. However, they may cherry-pick the evidence. This happens when your system focuses on finding confirmation for a pattern.
A robot may zoom in on a single event that does not prove anything. It may choose instances that resulted from unforeseen circumstances. These are not regularities.
The quality of evidence is often questionable. An automated system may use one backtest out of hundreds. It will be presented as the most likely outcome when hundreds of other tests prove otherwise.
Most Forex Robots Are Scalpers
Most robots available today are designed for scalping. This is the most hurried strategy based on short-lived trades. Each position may last seconds. The focus is on the number of trades, rather than their sizes. Scalpers aim to make a profit from numerous small trades during the day. Each position may bring them between 5 and 20 pips on average.
Scalping is not for everyone. If you prefer long-term strategies, robots may not suit you. Most trading robots set a target of a few pips per trade. In addition, not every broker allows scalping, and the spreads may be too high for the EA.
Causes of Imperfections
Computer systems can sift through immense volumes of data. Still, their forecasts may be flawed. First, they are programmed for particular market environments. This means a robot may fail to recognize a certain combination of quotes and indicators.
In Forex, not everything is fully foreseeable. The market may experience sudden shocks that will disrupt any strategy. There is an infinite range of possibilities: ups, downs, and sideway moves. Therefore, do not rely on any single robot. Use it to enhance your own vision and strategic arsenal.
Using Robots for Effective Trades
Sadly, an ideal FX robot still sounds like science fiction. If a perfect system existed, its owners would be making millions. The best Forex robots are quite intelligent. However, their capabilities are incomparable to true human talent. They are handy additions to a strategy, but not more.
A trader is free to choose whether to use a robot or not. Weigh up all the pros and cons before making your final decision. Robots will not make you wealthy overnight, but they can enrich your strategy. Of course, provided that they come from a trustworthy company.