The deregulation of the Forex market, now offers small investors and traders the chance to trade the Foreign Exchange and this has given rise to vast array of automated Forex trading systems. These provide the home based trader with a ‘set and forget’ trading system, where the trader installs a Forex robot onto their Metatrader platform, selects their criteria and the robot takes over. ..well that’s what is supposed to happen.

This is likened to finding the Holy Grail, and though there are some intriguing Forex robots out there, extensive testing by experienced traders has exposed many flaws in the claims made by the vendors.

Most of the Forex robot performances are based on historical ‘back testing’ results, not live account testing and depending on what platform you are using and the fallibility of the historical charts you download, these will and do vary wildly. We have never yet been able to mirror the results offered on a sales page. Some Forex robots we have evaluated were incredibly efficient at wiping out our demo account, so don’t believe all the claims.

Demo accounts also have the reputation for producing much better results that live accounts. Demo accounts will always fill a trade, whereas live accounts are subject to spread variations, slippage, and liquidity, plus broker quirks and lot sizes, just to mention a few influences. So taking this into consideration, if a Forex robot wipes you out on a demo account, how do you think it will go live???

Much as I would love to, I am not going to list the Forex Robot failures, why? quite simply, I don’t want to get sued!

How does an automated Forex trading system work?

Each is different and reads different signals, an automated Forex trading system analyses and interprets its preselected series of indicators, then determines entry and exit strategies based on its analysis. It opens a trade automatically, based on risk management strategies and attempts to make a profit. It will also close the trade, in line with its pre-coded parameters.

Most of the modern Forex robots work on Metatrader4, which is a very common trading platform and they need narrow trading spreads, often 2-3 pips, occasionally up to 5 pips. They often need time to “bed down” before they begin trading. Some Scalp, which is grabbing small quick trades and others trade over extended periods and all will have loosing trades. You need to make sure they have stop loss strategies built in, some don’t, so double check!!

This is another way Forex robots enhance their supposed performance look good. Without a stop loss strategy, they allow excessive draw-downs, keeping the position open until it reverses and comes into profit. If the draw-down is big it can also crash your account since you may not have the funds in your account to hedge the loss, so your broker will close your account.

If you don’t want to day trade and want to use automated Forex trading, there are two Forex robots we use, these two robots are regularly updated by their developers, so we regularly watch their performance and keep them up to date, it’s all part of our personal risk management strategy for automated Forex robot systems.

To find out more about these Forex Robots, we review them on our new Blog, you will also find other Forex Trading Tools.

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Filed under: Global Finance • Personal Finance

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