Forex Robots

Forex trading robots are designed to help traders who want to use automated trading methods to assist with the technical analysis and repetitive elements of forex trading.

Forex robots can automatically trade 24 hours per day and are simple enough to buy over the internet. But do they really work? Can they actually help traders to maximise profits?

This article is designed to give you the lowdown on forex robots and provide guidance to traders on how they can be used effectively. Read on to find out more.

What Is a Forex Robot?

Finding the best software to correctly perform automated trades can be time-consuming, so many traders choose to enlist the help of a forex robot.

Sometimes referred to as FX robots or, simply, ‘bots’, these are not physical robots – instead, they are highly specialised computer programs which have been created to carry out many different trading functions.

These range from letting traders know when to place a trade (known as ‘signals’) to automatically placing and managing trades on a trader’s behalf.

What Do Forex Robots Do?

There is a broad spectrum to consider when it comes to what tasks a forex robot can actually perform. Most robots are set up to simultaneously scan and interpret millions of different forex charts in a way that a human wouldn’t ever be able to do.

Some of the simpler FX robots are programmed to simply send trading signals to traders, whilst others are able to act upon those signals; for example, by deciding when would be the best (or worst) time to trade.

The top-rated forex robots can offer ideas on how to identify profitable trades within unpredictable markets, even when the trending direction is not obvious. These robots have the capacity to choose the most advantageous trend to ensure increased profits and reduce the risk of loss.

For most new traders, the idea of engaging a specialised piece of computer software to carry out all of the difficult aspects of trading is likely to be very tempting.

But it’s not as simple as just going about your daily life, letting your forex robot do all of the work and watching your trading profits roll into your bank account.

Unfortunately, there are many scam robots on the market designed to make people believe that this is the case, but the best automated trading robots do require regular human input. Traders need to be able to distinguish between a scam robot and a viable robot that is worth spending money on.

Why Do People Use Forex Robots?

Many inexperienced traders choose to use a forex robot because they are hoping to be able to easily make money from the forex market without needing to spend lots of time on trading or carry out any actions manually.

But they are not guaranteed profit-makers. Before using one, traders must first identify a good currency pair and the ideal timeframe in which to trade.

People may also choose to use a robot to remove the human emotions that can come into play during trading activities, particularly when vast profits or losses are being made. Regardless of whether you are a new or experienced trader, these emotions might lead you to take actions that are not necessarily the most profitable.

Do They Actually Work?

The answer to this question very much depends on your expectations of the robot. Forex robots are programmed to enter trade orders by substituting the need for a human trader. The trade orders the robot will enter are determined by a series of mathematical algorithms set by their creator.

For traders using a completely mechanical trading strategy, forex robots can offer a solution that’s able to trade on their behalf throughout the day and night.

The actions carried out by forex robots are determined by the technical analysis tools they have been set up with. The best forex robot programmers use a method called backtesting to ensure their robots are designed to maximise profits.

Backtesting is where the programmer uses historical data to test how a proposed trading strategy would have played out in real life. It is possible to automate this process, but this would mean carrying out adjustments to improve the robot’s performance in areas such as maximum drawdowns and placing stop-loss orders.

While most forex robots do ‘work’ in the sense that they are programmed to automatically carry out trades, unfortunately, they are not foolproof so they cannot provide any guarantee of long-term profits.

At best, they are a useful tool which can be used by forex traders to help make informed trading decisions. At worst, they are scams through which traders frequently end up losing money.

If you are thinking about purchasing a forex robot, read our tips below on how to use your robot effectively and avoid spending money on a scam.

How to Use Forex Robots Successfully

If you have decided to use a forex robot, here are a few ideas on how you can maximise your chances of using a robot successfully:

1. Don’t Expect Too Much

It might sound obvious, but it’s important to remember that robots are just that – robots. That means they can only perform the functions they were originally created to carry out.

They are unable to use any elements of creative thinking to envisage what might happen in the future. They can only use their programming and the data they gather relating to past performance to make predictions.

If you choose to use a forex robot, try not to rely on it completely when it comes to carrying out your trading activities. To reap the rewards of trading, you will also need to apply your own observations and research – for example, it is sensible to keep on top of economic changes and the international financial climate.

2. Do Your Research

Unfortunately, many robots are hindered by viruses and hackers so it’s important to ensure you find a reputable option. To avoid scams, choose a robot which has been on the market for some time, making sure that there are plenty of positive reviews and online testimonials.

Always be mindful that some reviews may not be genuine and be very wary of new forex robots that pop up overnight with hundreds of glowing reviews, even if the creator claims to be offering incentives such as a money-back guarantee.

Don’t rely on the fact that a robot has been backtested – many programmers ‘cherry-pick’ the backtest with the best results to use within the marketing of their robot, even if they carried out hundreds of other backtests which did not demonstrate accurate predictions.

3. Use the Trial Software First

Many forex robot programmers offer a free trial of the software before expecting you to make a financial commitment. Always take advantage of this and consider trying out more than one software option to see which suits your personal trading style and profit expectations the best.

4. Set up Trading Parameters

Before you begin trading forex, set aside some time to create a trading plan – and make sure that you stick to it.

Your plan will need to include information such as your risk tolerance levels and profit goals. Once you have decided on this information, ensure that you update the parameters of your forex robot to ensure that it performs in line with your personal preferences.

5. Keep a Close Eye on Your Robot

As explained previously, a forex robot cannot consider external influences which have an impact on the ever-changing forex market conditions. This means that you will need to regularly check in on the trading activities it is performing, stay updated on the financial climate and adjust your parameters accordingly.

Final Thoughts

Since the forex market conditions are constantly evolving, only the most experienced forex traders can recognise the best and worst times to enter the market. There are a whole host of forex robots available – some are free, while others can cost thousands of pounds.

The golden rule is that if something seems too good to be true, it probably is. Even if a forex robot has been marketed well and looks as though it will be highly profitable, you should always proceed with caution before spending any money.

Sometimes, forex robot software will react to false price spikes or incorrect data that a human trader would be able to disregard as an anomaly. There are so many different variables to take into account that nobody (not even a robot) should solely rely on historical data to accurately predict what might happen in the future forex market.

Instead of spending money on a forex robot, new traders will usually reap better rewards by opening a demo trading account. This can be used to improve their overall knowledge, practice trading and find a profitable strategy to be used later in real-life forex markets.

WikiJob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.