Robots are dominating the trading markets nowadays, It is said that around 80% of the trading in the stock markets happens through automated robots. On the other hand, robots are also very commonly used in forex market trading as well. One of the major reasons for the proliferation of forex trading robots is the fact that creating robots at this time is not as hard as it used to be. Many years ago, only those who had technical knowledge could code forex robots. Those who did not know coding in languages like python couldn’t hope to create automated robots or had to rely on external developers to get them done.
But in recent years, the situation has changed. The advent of the MetaTrader platform in the retail forex trading market has led to the creation of expert advisers (EAs) which are the robots in the retail market and help to automate trading. These EAs are easy to code. There has also been a growth of many platforms where anyone can get their trading strategy automated with a few clicks. So, creating an automated forex trading robot is no longer the domain of big traders or financial firms but the robot trading market has been truly democratized nowadays and this is indeed a welcome change.
What is Automated Forex Trading?
Automated forex trading is the method by which the trader does not manually trade or manage his trading positions but builds/rents/buys a trading robot and sets it up on his platform so that it can trade his account and manage his positions according to the strategy that is built-in.for you
Is Automated Forex Trading Right for You?
Next comes the question of whether traders should go for automatic forex trading. It is a well-known fact that a majority of retail traders failed in trading and make losses. It is also known that the main reason for their failure is not that their strategy was bad but the fact that they could not control their emotions. Trading is a big challenge mentally and very few traders manage to overcome that. Those who do manage to do that are truly successful traders. The money going in and out and the profit column alternating between positive and negative numbers is too much for most traders to handle and ultimately they fail to control their emotions and their well-thought-out strategy goes for a toss.
If you are one of those who cannot control your emotions while trading, then it is better that you try to get your strategy automated. Not all strategies can be automated but if you can explain your strategy in a well-defined manner using pen and paper, then most probably, your strategy can be programmed and you should make all efforts to get your forex trading automated.
What Will the Best Forex Robots do for you?
If you have decided to automate your trading with a robot, the next decision would be to go for your own strategy and get it automated or whether you want to buy from among the thousands of forex trading robots that are available commercially. If you take the second choice, then you would be facing a big decision as it is very difficult to choose the right ones among so many that are available.
Thousands of commercial robots claim to give great returns with very low risk but there is no way that anyone can trust what they advertise. There are many methods and platforms that are available that manipulate the trading data to show as if the robots have done really well and hence it is very difficult to separate the best from the rest. Some are very cheap and some are costly but have a money-back guarantee and it really is a difficult choice to make for the traders as they not only need to shell out money for the robots as such, they also need to put their own funds at stake by placing trust in the robots that they have purchased. If they do not know what they are dealing with, the losses suffered by the traders in their trading account could quickly escalate and this would present a very unpleasant situation for the trader.
Assuming that the trader does manage to choose the best forex trading robot that fits his risk and returns preferences, the robot could then trade on behalf of the trader and place trades automatically, and manage the open trades as well. Many robots buy/sell based on the strategy that they are built upon and then place stop losses and take profits and manage the trade in real-time. But for most of these forex robots, the trading platform has to be open all the time so that the robots can monitor the open trades and the market conditions and decide what it wants to do. If things go well, the robots could be a very good ally to the trader and quickly generate some good profits for him. It is always better to keep an eye on what the robot is doing as sometimes, the trader might need to step in if he finds that something is going wrong in terms of trade management or platform connection or any such untoward events. This could also happen due to changing market conditions and this may not be anticipated by the robot. The trader can decide to close the trades or stop the robot in such situations and can then decide what to do next.
What are the Benefits of Using Forex Auto Trading Software?
What kind of a benefit a trader can get from auto trading software would depend on the type of trader he is, what kind of funds he manages and what his expectations are. The auto trading robot can be a very complicated one that is costly and programmed by experts and used in major hedge funds and investment firms or it could be a very simple one designed and developed by the traders themselves and used by retail traders in their MT4 or any such retail forex trading platform.
The risk/returns and other associated parameters vary widely depending on the trading environment. While hedge funds would be happy with returns of 2% a month with very low risk, retail traders are generally looking for much more and anything less than 4% a month would be deemed as a failure by them. As long as the software runs stably and reliably and generates steady returns with very low drawdown, then the trader should be happy. The trader should also be able to feel liberated as he no longer needs to sit with his trades and watch every move of the market and feel all the associated stress and tension.
He can leave all this to the forex trading robot and can choose to take some well-earned rest or focus on other activities in his life with the assurance that the robot would be able to take care of his trading and his funds for him. This is a highly reassuring feeling for most traders and apart from generating some good returns, the freedom to be away from the platform and live your life would be the greatest benefit of using auto trading software.
Things We Consider When Choosing the Best Forex Trading Robots
There are various factors that one has to consider while choosing the best-automated forex trading software. One of the first things to look for is backtesting. How far back in history was the backtesting done, what were the results, how reliable were the results, and what was the methodology that was followed for backtesting. These are the factors that need to be verified before the trader can rely on the results as even a slight mistake in the data or the calculation could give a big difference in the performance.
Next comes the actual live performance of the robot. Many of the commercially available ones have a demo period for the trader to try out and the trader needs to study the results during this period and see if it is in line with the backtesting results that the robot makers had presented.
Next is the drawdown that we have been mentioning many times in this article. Risk management is a key factor for successful trading as many of the top traders would vouch for. So the trader should not get swayed just by the returns that the robot generates but should also have a sharp eye out for the risk that the robot is taking in its trades.
Along with the risk comes the scalability of the robot. Some of the robots perform extremely well when they have only very little funds at stake but as the fund sizes grow, the order sizes also need to grow and this is the time that many robots begin to struggle.
Like any other product that is being purchased only, the trader should also watch out for the rating and the reviews that the robot has received from the others. It is always better to see varied reviews and choose robots that have a lot of reviews spread over a period of time. It is also important not to get swayed by a few reviews but do a thorough analysis of the same,
Though many of the robot makers may not reveal the strategy behind a robot, it is good to attempt to understand what the robot does. This information can be gleaned from the robot makers or as the robot begins to make trades, the trader would be able to get an idea of what it is trying to do, as long as he is knowledgeable and watchful. An understanding of this is necessary so that they can be aware of when something goes wrong and can step in if and when things do not seem to be going the right way.
Are You Ready to Hand Your Trading Over to a Forex Robot?
So now that you have decided to go for a specific trading robot before you make the final jump you need to be very sure on whether you are ready to give your trading to a robot and trust it to do well. Of course, it is always better to keep an eye on what the robot is doing and to ensure that things are going according to plan but what many traders do is that they try and babysit the robot as well as the trades made by it.
They are unable to leave the trading platform and are glued to it like before and just like how they were doing when they traded on their own, they try and make decisions on behalf of the robot and try to open and close trades based on their own analysis of what the market is doing, In other words, they do not allow the robot to do its job and execute its strategy but they force the robot to do what they feel is right. This tendency has to be removed by the trader before he starts running the robot. He should start to trust the robot to do the trading for him but if he is unable to do that, either the robot is wrong or the trader does not have a mindset to hand over the trading to the software. In such a case, unless and until the trader can change his mindset, he shouldn’t give up the manual trading and he can continue to do so until he changes his mind and hands over the account to the robot that he has chosen.