In an era where almost every aspect of life is automated, the financial markets also appear to be following suit. Forex robots commonly referred to forex expert advisers are increasingly cropping up, consequently relieving people the burden of carrying out extensive research and analyzing charts to trade.
Thanks to forex robots, people no longer have to carry out extensive analysis or spend hours behind desks to try to predict the next price movement. Operating as a specialized program or software able to generate trading signals, forex robots have essentially simplified and revolutionized the art of trading.
While some forex robots deliver trading signals to traders, some are programmed to work on the signals consequently open and close trades. In addition to opening and closing trades at a profit, the forex expert advisers also offer high levels of risk management.
Even as Forex Robots threaten to take over all aspects of trading, questions continue to linger. Do these tools work? Do they generate consistent profits that traders can rely on? How effective are they when it comes to risk management?
How Forex Robots Work
Forex Robots and expert advisers rely on a variety of technical indicators as well as custom scripts to come up with trading signals. While the robots mostly work on the MetaTrader platform, anyone can code and come up with a trading program that opens and closes trades based on certain conditions. Forex robots are, therefore, able to scan an ungodly amount of charts, leverage the power of technical indicators to detect trading opportunities.
Once they identify the trading opportunities or signals, the expert advisers execute trades or pass the signals over to traders for them to execute the trades manually.
Does Automated Forex Trading Really Work
It is safe to say that no machine is ever going to be 100% accurate in whatever it does. The fact that machines are designed and programmed by humans means they will always be prone to errors. Just like any other programmed machine, forex robots are no exception. While they can generate significant profits, they are also prone to errors, which can result in a substantial amount of losses in the markets.
Experience has shown that forex robots do work, but also come with their fair share of limitations, as the financial markets can be erratic at times. The expert advisers have proven to work best when currency pairs, stocks, or commodities are trading within a tight trading range.
A trading range made up of highs and lows allows expert advisers to open long positions at the lower end of the range and close them at the upper end, consequently opening a short position in anticipation of the price moving lower once again. Likewise, the expert advisers also work best in well-defined trends whereby the price is moving in a particular direction with minimal pullbacks or corrections in the opposite direction.
Forex Robots Limitations
The fact that Forex robots work best with ranges means they are only effective in generating few pips and may miss out on significant movements. Likewise, automated trading tools can pose significant dangers in times of high volatility in the markets resulting in wild swings. Large swings can trigger stop-loss orders resulting in the wiping out of profits accumulated over a long period in a heartbeat.
That said the actual efficiency and accuracy of the forex robot come down to many factors. It depends on the technical indicators in use as well as the underlying market conditions.
Just like any other industry, the forex robot industry comes with its fair share of scams. Finding a forex expert adviser able to generate consistent profits over a long period is no easy task. For that reason, one cannot rely purely on forex robots to trade the forex market. Trading is an art that requires people to put a considerable amount of time in research.
The fact that forex robots can never be used in isolation means any person looking to make a fortune in the forex market must have a basic idea of the financial markets as well as skills to trade the capital markets. Intuition, as well as the ability to analyze the markets, is essential even when using forex robots to generate trading opportunities.
The best way to assess if a forex robot really works is to download the trial version and backtest it in a Meta Trader. By deploying it in a demo account, you will be able to ascertain if the automated tool will work in actual market settings.
While planning to invest in a forex expert advisor, it is important to note that no strategy or tool is ever going to be 100% accurate. If indeed there were a system able to guarantee results 100% of the time, no developer would be willing to offer it at any price.