Are Forex Trading Robots Real?
What is a Trading Robot?
Many traders that are invested in the world of the forex market catch themselves searching for ways to not only simplify the work, but to make even more money in the process. This is where forex auto trading robot software comes into play. A trading robot is basically a program written to automate trading. They are also referred to as trading advisors quite often. The main task of any forex trading robot is to simplify the decision-making process, up to the point of its full automation. Therefore, a trading advisor is a program that is able to automatically open and close transactions on Forex, as well as other markets. These robots connect to the trading terminal and can trade for you automatically according to the specified settings.
Statistics show that 8 out of 10 successful forex traders are actually trading robots that implement special market strategies, and only up to 20% of traders in the financial markets are real people. You can find a sufficiently large number of automated trading systems online developed by programmers from all over the world. Naturally, most of them are quite seriously advertised, promising the trader significant profits with minimal effort.
This article is intended to help you understand:
- What a trading robot is;
- The advantages and disadvantages that come with it;
- What kind of advisors there are;
- Determine whether it is worth using them in your work at all.
The Essence of Trading Robots
So, how do forex trading robots work? As it was already mentioned above, a trading robot or advisor is a program designed to integrate with the trading platform in order to automate the trading process. Any trading robot’s workflow is based either on indicators of technical analysis, or on the postulates of the theory of mathematical probability. When creating a robot, a programmer takes one or another technical indicator as a basis and automates its work in such a way that an advisor not only shows and identifies signals, but is also capable of making independent decisions. There are also semi-automated advisors, which we will touch upon.
Typically, there is an indicator or a group of indicators that work in an automatic mode. Special code is written for them in order to integrate with the platform and automate the work. This is a very important moment that needs to be understood, especially for novice traders who have high hopes for trading robots. Often enough, many people mistakenly believe that trading robots analyze something and make some kind of decision based on the input data. In reality, everything is much more mundane and simple.
Types of Trading Robots
If you are wondering what is the best forex trading robot, then you must first understand how they are classified. To classify trading robots, it is necessary to determine the characteristics by which they will be grouped. In general, according to the principle of their work, robots can be conditionally divided into two large groups:
- Automated trading robots;
- Semi-automatic trading robots.
The first group includes robots that are programmed to fully automate the trading process. This means that they not only find the signals themselves, but they can also open deals. Naturally, “full automation” is conditional here. The fact is that the robot still works based on the settings imposed by the trader. This includes things like the volume of the lot, risk limits and capital management.
The second group includes robots, in working with whom the final decision is made by the trader. These kinds of robots independently determine the signals and give the trader the results of their analysis. The trader, taking into account these results, makes a decision in accordance with his risk management and capital management strategies.
What is the best automated forex trading robot? Which type of robot from the classification above is better to use? It’s a matter of taste. There is no single best robot for forex trading. Someone prefers to make the final decisions themselves, and someone wants to achieve maximum automation and not have to sit in front of the computer.
Whether fully automatic or semi-automatic, all trading robots essentially share the same role – to minimize the participation of the human trader in the workflow. With fully automated robots, transactions are opened by via algorithms. Consequently, the trader practically does not participate in the process of trading. Another advantage trading robots have lies in their ability for diversification. You can install any type of robot and work with it. This gives you the opportunity to earn a profit in a wide range of market segments and situations.
An important advantage of robots have over human traders is that they do not have emotions. The trading robot does possess qualities such as greed. It does not experience fear. The robot also never gets tired, it does not have any psychological burden imposed on it. Another important point is that the robot pays attention only to the signals that the indicator gives, the ones that it is meant to follow. It does this objectively, based on the readings of the algorithm.
It is also important to note that the removal of serious stress loads on the trader plays a big role in the long run. Even the most successful and experienced trader’s attention dulls with time. As experience shows, this leads to some of the most elementary mistakes that can be made in the business. Traders then want to correct their mistake and make up for the lost money by taking on unreasonably high risks which either pay off, or lead to even more significant problems. The emotional component, among other human factors, ruined quite a few successful traders.
The disadvantages of trading robots are mostly based on their lack of human intelligence. Artificial intelligence is not yet capable of being equal to humans. Therefore, the robot is capable of making only standard decisions that are embedded in its program. Even beginners should understand that standard solutions and the ever-evolving market are going to have some compatibility issues.
Another drawback is the fact that advisors become more and more obsolete as the market evolves. Any profitable strategy that brings in a good amount of income today will become obsolete after a certain period of time. Soon after, the robot will begin making mistakes more and more often. This is why if you expect to remain profitable, you will likely have to buy newly updated advisors.