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Forex Automatic Trading Robots (EA) – Things You Must Know Before Using Them.
The popularity of forex automatic trading robots keeps increasing, in spite of the dubious returns generated by using them. If you’re interested in trading currencies, there’s more than a slight chance that at some point in your trading career you’ve considered buying one of the software advertised online as the greatest revolution in trading, the best robot that awes the pros and experts with its successes. There’s little merit to these ostentatious claims, but if you are intrigued by them, here are some things you must know before using or buying any of the forex automatic trading robots.
Forex robots are automated systems that enter trade orders in the place of a human trader. They are programmed to generate returns by the application of mathematical rules which are decided by their creators. In other words, the intelligence and skill of a forex robot is entirely dependant on its creator. The forex robots run the pre-programmed routine under all circumstances; they don’t change, revise, or adapt it to changing conditions in the market, but will attempt to cut losses based on the instructions provided to by the programmer.
The commands executed by the robot are based on the tools of technical analysis, but sophisticated programmers will also use back testing to optimize the results of their robots. This process can be automated itself, and involves tweaking of the program to ameliorate its performance with respect to maximum drawdown, the placing of stop-loss orders, and other aspects of money management.
What the programmers of these robots won’t tell you.
There are important problems with the logic behind the creation of the forex automatic trading robots, and the actual results generated by them. The first and obvious issue is the fact that the robots have never been tested in actual market conditions. In almost all cases, they are tested on historic data, and non-trade related problems, such as connectivity issues, or problems that originate from the broker which would not be reflected on market data, are ignored. For example, even the best robot will be useless if during some inevitable technical problem originating at your local ISP a brief blackout wipes out your account. Similarly, if, for whatever reason, spreads of your own broker widen to levels much greater than that prevailing in the vast majority of the market, even the best automated system will be useless. Only good money management methods, through the use of proper stop-loss orders, and preparation and willingness to admit and recognize losses can ensure survival against such periods.
The second issue is born of the fact that by using a forex automatic trading robot, you’re basically handing over the control of your finances to a machine that has no brain. It is programmed to run according to a set of rules at all times, and has no ability to adapt itself to changing circumstances, regardless of the severity and importance of the changes in question. This is perhaps the most important disadvantage of using a robot in the forex market where change is the only constant.
Finally, and in relation to the above, we should remember that the robots are only as smart as their creators. Do you really believe that the peddler selling you the robot is a market-busting genius at the level of a Warren Buffet, or George Soros, who, after all, have had their own fair share of disastrous trades over the years? If you don’t think that the peddler is that smart, then why do you expect rules written by him to beat the markets in a way that even the best traders with proven records have never been able to do?
Conclusion: What to seek in a forex robot?
We do not advise that you purchase any forex robot, since trading by using them, without understanding and knowing what you’re doing goes against all the basic principles of a successful trading career. The only kind of forex robot useful for you would be one which you could use to automate your own trading strategy, or one that you understand and are confident about, having examined the inner mechanism, and design of it. When you buy a forex automatic trading robot, you know close to nothing about why and how it performs, since even their creators don’t know why the particular combination on the basis of which the robot is operating is supposed to be creating good returns in the markets.
On the other hand, if you create your technical scheme and want to automate it, there’s nothing wrong with purchasing a forex API pack from a forex broker or API developer and using it for that purpose. But many of us lack the confidence and the experience necessary for creating and customizing these tools ourselves, which is why the robots are so popular on the market these days, advertised by extravagant claims, and hyperbole.
In short, the forex automatic trading robot is an alluring, great idea that promises a lot, but delivers little due to the random nature of price action in the financial markets. If in spite of all the information in this article you still have confidence that some of the robots out there deliver the incredible returns promised by their creators, consider the obvious. If the owners of these systems have achieved the Holy Grail of trading, why would they peddle it to you online for meager sums? They would not even need to advertise them, as financial institutions all over the world would compete with each other to acquire these products from them. Instead, large firms and broker ignore the robots and creators. Why won’t you do the same?
Opinion about automatic trading
Automatic trading is attracting more and more traders but is it a good alternative to manual trading? Since the objective of any trader is to earn money, the only question to ask is which of the two methods offers the best trading performance. To answer this question, it is important to understand the advantages and disadvantages of automatic trading.
Can the benefits of automatic trading improve your performance?
The main advantage of automatic trading is the automation of your position entries and exits. This allows you to spend much less time in front of the screen and therefore have more free time. It is therefore an advantage of convenience that is given here.
The other great advantage of automatic trading is that your trading strategy works 24 hours a day. All buy/sell signals are used. You no longer miss any trading opportunities. If your trading strategy is a long-term winner, automatic trading enables you to generate more performance. Effectively, if, for example, 2/3 of your trades are winners with your strategy, the more trades you open, the more you win.
To achieve the same performance with manual trading, you either need to spend more time trading or increase the size of your positions. But in the latter case, the increase in leverage induces a greater risk. From this point of view, automatic trading therefore wins the trading performance match hands down.
Does automatic trading really eliminate emotions?
Emotions are one of the main factors that causes losses for novice traders. There are emotions related to greed (appetite for profits) and euphoria (feeling stronger than the market after a series of winning trades). There are also emotions related to losses such as frustration, anger, depression, fear of losing and panic.
With manual trading, you are confronted with all of its emotions. This is therefore a factor that can significantly affect your trading performance. However, all emotions related to losses are often the result of the absence of risk management in your trading strategy. If you apply strict money management to all your trades, you are no longer subject to these negative emotions. Regarding emotions related to winnings, no trader is immune.
With automatic trading, you are only confronted with emotions related to winnings. Effectively, if you start making money, you may be tempted to increase the size of your positions to earn more and more, as is the case with manual trading. Concerning the emotions related to losses, you do not suffer them since you are not in front of your screen. However, you must apply the risk management rules to your trades or risk heavy losses.
In terms of emotions, automatic trading is still an advantage, even if we can qualify it. Effectively, in both cases you may or may not apply risk management and want to earn more and more by taking more risk.
What are the limits of automatic trading?
For a trader who has no experience in manual trading, automatic trading seems to be more efficient. Effectively, it is only by trading that you realize the numerous limitations of automatic trading:
– Stop loss management: With automatic trading, placing of a stop loss is automatic. However, depending on the configuration of the price chart, the positioning of a stop loss needs to be adapted to either limit losses or follow the movement. A stop loss has a significant impact on trading performance. Novice traders tend only to focus on winning trades but performance is strongly impacted by the ability to minimize losses. This is often what makes the difference between a winning and losing trader. In my opinion, stop loss management is more important than the trading strategy itself. Automatic trading does not allow for any flexibility in this respect. Movement of a stop loss must follow logical rules, namely, stop loss at x pips, movement after x time if the trade is positive, etc.
Technical Analysis: Automatic trading does not allow you to base your position entries and exits on chart patterns, trend lines or even simple horizontal resistance and support lines. With automatic trading, your strategy must be oriented towards technical indicators. If this is not the case, it is often impossible to transcribe your analysis into an algorithm. Technical analysis does not follow logical rules. Nothing can replace your eye for detecting chart patterns and the different plots on a price chart.
– Strategy development: The big mistake for a lot of automatic trading users is believing that once the strategy is developed, there is nothing more to do. In this case, you will be ruined. Whatever your type of trading, you need to develop your strategy. It’s easier to see this with manual trading because you can see changes in market conditions in real time. If you use a trading algorithm, you will clearly not be monitoring your account every day. So you can accumulate losses faster before you change anything.
Moreover, few people touch their automatic trading strategies due to a lack of technical skills or the influence of the word ‘automatic’, which implies that there is nothing more to do once a strategy has been found. Most traders look for a miracle algorithm and then hope to make a fortune without having to do anything. Whether you do manual or automatic trading, you need to spend time developing and monitoring your trading strategy. There is a reason that banks and hedge funds pay mathematicians a fortune to keep their trading algorithms performing well. It’s the same for a trader. It must adapt to market conditions.
– Experience: Only by practising can you gain experience. This applies to all areas. With automatic trading, it is the algorithm that does everything for you. Unlike humans, they do not learn from their mistakes. Errors are corrected only if the developer changes the code. In addition, if you do automatic trading, you will spend your time on sites that promote this type of trading. You stay in a bubble that only has coders. You don’t go to sites with traders who trade manually and whose experience is valuable to help you improve your trading quickly and become more efficient.
Good habits to adopt with automatic trading
Whether you do automatic or manual trading, developing your own trading strategy is the best way to optimize your performance. Develop a strategy that adapts to your investor profile and especially one that you understand. If you develop your strategy (which is essential), you fully understand the logic of the algorithm, the position entries and exits.
If you have the technical skills, you can code your strategy yourself. If this is not the case, have it developed by an expert. There are a lot of sites including ProRealCode which offers to develop your algorithm for free if you share it with the community.
In any case, never buy a trading algorithm on the net. That will surely be a scam. If someone sells you an algorithm, it’s because it doesn’t work otherwise they wouldn’t need to sell it. It’s as simple as that. Trading robot vendors always show you positive backtests but you should know that this is a customer trap. With any strategy, I can show you a positive backtest. All you have to do is choose the right period for the backtest. Any strategy (or almost any strategy) is a winner at some point. Develop or have developed your own trading strategy. You can also test the free strategies on the net.
My opinion on automatic trading
Automatic trading has many advantages, there is no doubt about it. It largely eliminates emotions and maximizes the performance of your strategy through 24-hour trading. This can be very profitable and high frequency trading is the most perfect example of this.
However, at the level of an individual who does not have the technical resources of hedge funds and banks, automatic trading can be a trap. It is essential to change your strategy regularly and you must not fall into the money trap, which you think is easy. Work is just as important as manual trading to develop your trading strategy.
I have been a manual trading enthusiast for many years. I have tried automatic trading several times and I have never been able to code all the elements of my trading strategy. In many cases, the management of stop losses and position exits does not follow a rule precise enough to be coded. Coding my strategy would therefore mean making it much less effective.
And what do you think of automatic trading?
Thread: What is Forex Robot?
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What is Forex Robot?
What is Forex Robot?
Forex-robot pros and cons?
Are you ready to file your trade deal with a Forex robot?
Trading robots are automatic or semiautomatic advisors, experts, and bots (sometimes they are called owls, rats) which are used for trading on exchanges and in particular on Forex. Robots are written in the MQL4/5 language.
They are classified into three types according to the mode of action:
According to the market strategy, advisors are divided into:
In addition, they can be automatic, when after configuring they do absolutely everything by themselves. And semiautomatic, when a trader himself opens a deal, and an advisor accompanies and closes it.
Why do traders use trading robots?
Certainly, for saving time. Once the advisor is written, configured, it will trade without the trader’s participation according to its work algorithm. Trader can only monitor its activities.
When using the special VSP server, a robot will be operating 24 hours a day that a real person can not do.
In addition, there is no problem in psychological terms. Since nerves are not wasted during dipping positions, because all responsibility is passed on the adviser.
Robots don’t get tired. Their operating time does not impact on the effectiveness.
The use of an expert should in no case be left unattended, since a robot may react inappropriately to the release of important political and economic news, and you can get into a huge drawdown instead of getting profit.
It is believed that all the bots siphon off. Actually it is not the fact. Another thing is that really good ones are expensive. But even if a trader buys an expensive robot, but at the same time money management is broken in the settings, then this wonderful advisor will siphon everything off.
It must be said that beginners on Forex like robots.
I’ve been through this myself. But after they twice considerably increased my deposits, and then siphoned everything off, I still can not recover, and I have no desire to get involved with advisors.
A forex robot is a software that can trade the markets like a human trader, thereby saving the owner the task of monitoring the markets and watching charts round the clock. Many so-called forex-robots are just inefficient contraptions that have flawed logic and hence ultimately lose money for their owners.
Very few trading software do a good job of trading the forex markets from a stochastic/probability perspective. Most of the people who design the trading robots being sold in the open market have no idea about the nature of and the microstructure of the forex markets. It is therefore not surprising that most of those contraptions lose money.
I do not subscribe to full automation of trading processes using trading robots, but I believe it is desirable for traders to go for partial automation of their trading processes and leave room for discretionary trading ( which I consider to be the best way to trade the forex and stock markets).
Forex robot also known as EA is an addon for metatrader.
The uses of an EA are many, it can provide and show any and all indicators on the chart, perform all the functions of the trading done by the trader or any combination of these. The use of an EA is sometimes to do something for the trader because there is no time or perhaps to dubble check something mathematically, personally i use these both.
The trader can have a professional make an EA for him or buy one that is already made. It can be as simple as “close all positions if equity = x or higher”, this would be a good idea if the trader has many positions on and wants to close his many trades in profit so he can begin again. Another one that i often use is to have the EA control my chart and positions when i sleep, the EA keeps track of what position is in profit and if there is enough profit the EA makes sure that that particular position stays in profit by moving the stop loss for me.
Some of the good things of using an EA are told above, some of the negatives would be that it costs a lot. I personally have had several made for me by a professional that only makes these. A full time programmer, buying that service costs a lot. But the price is what you pay for having the extra functionality, i can have even more freedom because of the EA’s that i use. Given the fact that i often trade on the h1 i could even have a completely different job and still trade at the same time live in the market, because of the EA.
It’s a question of price versus performance. Is it worth it? If you trade enough volume it is.
By simple basic Definition, A Forex Robot is a software created for the sole purpose of trading in place of a Forex exchange trader. These systems are very popular and has become an integral aspect of the Forex trading business. Forex Robots are very advanced systems and they can analyse, set SL and TP and then Open trades for a trader even when a trader is not allowed and the traders computer is even off. Robots makes use of alogrithms programmed into it by the developers.
Pros : i.e advantages of Robots – The Robots major advantages is that it gives a trader space because it works on their own.
Robots arent humans and on average these robotsdo not make any mistakes that is connected to emotions.
Cons : i.e disadvantages of Forex Robots – They are simply compter programs can can make mistakes and cause failure.
Also at some critical points, Robots are cannot save a trader from some very huge losses that can be caused by extreme Market Volatility.
Forex Rbots are expensive
I personally do not actually believe in Forex Robots, they can work well and make profits, But i prefer manual trading because i believe that i should be in charge of trade decisions that i am making in this business.
Thread closed as the contest has ended..
Well, i have never seen some Expert Advisor can making consistent profit for each months. The best thing is who has create that Expert Advisor it selves promote that they Expert Advisor can making consistent monthly income. Not all Expert Advisor is good to be use for a traders moreover if the trader it selves is only use Expert Advisor from other trader means not create it. Profesional trader who has create the Expert Advisor will build it basic on their trading characteristic and that means not all traders can follow it, even with complicated setting , i am not sure other trader can follow their Expert Advisor very well.
Now let’s we try to think the logic of trading in real life.
You have a store then some manufacturers come to offer some items for sale in your store. Some of the items they leave are:
2 ton of Rice.
1 ton of Sugar.
100 packets of Snacks.
In the first month, you can sell them all.
In the second month, you only sell Rice.
In the third month, you do not sell anything because of a disaster in your store.
Or if you are manufacturers of some product. You can made 1000 item for a month, in the first and second month you can sell it all. Then in the third month, you can’t sell one item because you lose with the competitor who has made more good quality item than yours. So, the point is this is a business, we must accept the risk of loss in any business around the world. We can’t predict the future, get consistent profit is almost impossible. Even in forex business, have a good trading rules is not guarantee we can made a consistent profit income.
It’s good or not using the Expert Advisor is depend on your selves, how much big your trading knowledge and experience is determine your future is it will success having good career in this business or not. Your skill to control the Expert Adcisor is the key, it will be make you making much profit or will loss everything because using Expert Advisor is more risky than trading manually.
A robot is defined as something or an object that is programmed to achieve certain results that the author or inventor has in mind, with this definition, it means that when someone builds a robot or an expert advisor to trade in the market, him only will understand it to the extent of earning well from it, whenever we get these stuff for free it means that the user manual that is meant to explain everything will be missing, this is why going on the internet to download anything you find to trade is a bad idea. It will only work if you personally know the developer or maybe someone that subscribed for the service gave it to you.
Robots are meant to give us easy ways to trade in the forex market but some traders have taken this too far by looking for the holy grail that we all definitely know cannot be found anywhere.
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