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Forex robots: Scam or do they actually work?
Find out whether you could profit from using a bot.
An increasing number of traders are using foreign exchange robots, also known as forex robots or foreign exchange bots.
But not all robots are successful, and if you use around four to five of them on recommended settings, only one or two might yield profitable results. Read up on how they work and what kind of risks or rewards they come with before getting started.
What is a forex robot?
Forex robots are computer programs that help indicate if you should buy or sell currency pairs at any given time. One of the main advantages of using forex robots is that they’re not associated with the psychological factor that can affect human judgment.
You can find a number of forex robots over the Internet, but you should take into account that there is no foolproof system that can guarantee long term returns.
Do these robots actually work?
A forex robot works in entering trade orders by replacing a human trader and relies on trading strategy as implemented by the program. The creators of such programs set in place a range of mathematical rules, which the robot then applies to generate returns. The functioning of any such program, as a result, depends largely on its creator.
The commands that the bots execute depend on their technical analysis tools, but good programmers make use of back testing to get optimal results. While programmers can automate this process, it would require making certain tweaks to improve performance in areas like placing stop-loss orders and maximum drawdowns.
What are the types of forex robots?
The use of foreign exchange bots for automated trading can vary depending on specific requirements. If you’re considering using a computer program to help simplify your trading woes, details of your options are as follows:
- Fully automated. This kind of trading is in line with black-box or algorithmic trading. Here, a computer based algorithm works on factors like price, quantity and timing, and then initiates the trade automatically. As a user, you can make some changes to the program’s technical parameters, but the program controls all other aspects.
- Signal-based. There is an absence of complete automation in this process. A computer program draws a user’s attention to potential trades or signals and the user then manually executes the trades using the services of a broker. So, while the program generates leads, the implementation is up to human traders.
Is it possible to compare forex robots?
If you’re considering investing in a forex robot, consider the following.
- Profitability. An easy way to compare forex robots is to take a look at their profitability over a period of time. This would involve comparing month to month as well as year to year results. Some comparison charts give you a detailed breakdown of aspects like leverage, drawdown and total pips.
- Number of trading sessions. Forex robots come with a different number of trading sessions or strategies, each offering its own level of profitability and reliability. The use of this technology lets users do away with carrying out extensive calculations or spending time in selecting settings. You get to decide desirable profit levels, but bear in mind that the higher the desired profit level, the higher the risk.
- Currency pairing. Make sure you find out if the foreign exchange robot you plan to get works with desired currency pairs. This is because not all robots support all currency pairs and you should ideally look for ones that pair USD with maximum currencies.
What are the pros and cons of using forex robots?
- More trades. A forex robot can generate considerably more trades when compared to a human trader. It can also work in replicating its actions across multiple time frames and markets.
- The psychological factor. Human traders can let their emotions rule their decision making process, but with a robot there’s no psychological factor to worry about.
- Scams. While there are some forex robots that deliver positive results, there is no lack of promoters who market bots for no other reason than to make money. Before you choose any one, make sure you check its credibility.
- Risk perception. While human traders can perceive risk in turbulent times, risk perception with forex robots does not work in the same manner.
Risks of using forex robots
Know that there is no forex robot that can guarantee you returns, so don’t fall for tall claims without exercising due diligence. Remember that while the temptation of using forex robots might be strong, their delivery has a lot to do with understanding the largely random nature of financial markets the world over.
Compare forex trading platforms
If you’d rather skip the bot and make trades yourself, compare platforms to find the one with the tools that best fit your needs.
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