Forex trading robots work if you’re looking for a technical answer. However, they are merely tools. The quality of a tool depends on how it uses and does. Some FX traders are comfortable relying on robots, while others face difficulties. Here’s why.
What is an automated forex trading robot?
FX robots are automated trading systems that use some method of electronic trading automation to initiate and liquidate forex trades with a set of rules and parameters. Expert Advisors, or EAs, are automated forex robots used to execute transactions within the MetaTrader forex trading platform.
Traders using the MetaTrader software to initiate and liquidate positions in their accounts use Expert Advisors to advise the trading software whenever they initiate and liquidate positions in their accounts.
Advantages
There are some advantages to it. A computer can analyze a lot of data in a fraction of a second that would take a human a few hours to do. Whether it’s had its first cup of coffee or not, it’ll come to the same conclusion. The system is available 24×7; it does not require sleep.
Disadvantages
It is also evident that there are some disadvantages. Forex robots don’t think, so they don’t make decisions. The system does not adapt to changes in market conditions. This is a purely technical trading device that does not consider market changes.
Additionally, the server can fail; for example, there may be a problem with the connection, and there may not be enough data.
Types of robots
The two types of robots allow you to manage some of these characteristics:
1. Automatic:
It is the forex robots that can do everything. The parameters are easy to set; they will automatically enter and close trades when you set them.
2. Semi-Automatic:
A robot will perform everything except opening and closing trades. It usually shows you the entry level, stop loss, and take profit it has calculated and how to follow them. The decision to take a trade is then yours.
It’s important to note that some people consider indicators to be robots, as they monitor price action and generate entry and exit signals. Indicators like MACD, however, are usually used in more sophisticated forex trading strategies. Trading indicators and robots are blurred because the latter relies heavily on the kind of market analysis indicators perform.
Do they make money?
The ease of using EAs is what attracts a lot of forex traders when they are just starting. However, to become good at Forex, you need skill, patience, and a lot of learning. It is also possible for budding FX traders to be more emotional than they should be. There seem to be easy solutions to both of these problems with EAs.
EAs, however, are not risk-free. Their reaction to market news is not immediate. Furthermore, they can become outdated as the market changes (e.g., trading GBPUSD is very different from when Brexit was enacted). It can also be challenging to distinguish between good and evil. In the end, forex market experience and technical knowledge are the main reasons beginners start using an EA.
Bottom line
Automated EAs are machines that control your account – if anything goes wrong, you lose everything. A semi-automatic EA is usually best, so you can check the recommendations before making a trade. Backtesting an EA on MT4 allows you to verify the validity of its claims. Performances in the past are not always a predictor of future success. A good money management strategy is essential regardless of whether you have an EA with a proven track record. It is possible to make money with EAs, and they have advantages. Before doing anything involving money, it is advisable to be as informed as possible.
