Forex Robots

Forex robots or expert advisors (EA) are software programs that are developed based on specific strategies and used to automate trading decisions. These robots can be programmed to provide trading signals, place trades and manage the complete trading strategy right from initiating a trade to placing stop losses and exiting the trade automatically, based on the parameters set by the trader.

The purpose of these programs is to eliminate human intervention thereby keeping emotions out of the picture when a trade is about to be initiated or is in progress and rather focus on developing a sound trading strategy that can be automated by forex robots, 24 hours a day.

Forex robots are designed to interface with the trading platform of the broker thereby making it compatible to execute trades.

A forex robot can have an inbuilt custom trading strategy, but they cannot replace humans in building trading strategies based on sound research. These robots are at best utilised to augment a trader by adding value to the execution of a trading plan.

Therefore the success of a forex robot to ensure profitability does not completely depend on the programs developed to ensure that the robot independently automates trade execution, but the profitability rather depends on a sound trading principal being designed by the trader.

Advantages-

• Eliminate human emotions leading to trading errors
• Robots execute trades only based on price action
• Assist traders who do not have the time to monitor prices constantly
• No prior trading experience required to use forex robots
• Can be used on multiple trading accounts simultaneously
• Forex robots can be designed to be expandable
• Since robots are software programs, they are usually consistent in their performance

Disadvantages-

• Good forex robots are expensive to set up
• Technical errors in the robot can lead to incorrect trades being executed
• May not be suitable for all market conditions
• Track records cannot be conclusive
• Have to be reset to respond to breaking fundamental announcements
• Excessive reliance on robots can cause the reverse effect for which they were employed
• Can be best used as a back- up for an ongoing trading strategy

How to choose the right forex robot?
Over the past few years, forex robots have become very popular trading tools leading to millions of robots available in the market; some of them for free, others at a cost. Choosing a forex robot can be a laborious procedure and there are no guarantees that a forex robot selected after analysing critical statistics would be able to generate profits. Mentioned below are some of the statistics you would want to verify when purchasing a forex robot.

1. While choosing a forex robot, you have to first make up your mind on whether to buy a forex robot or to build/ program one.
2. If you have decided to acquire a forex robot that has its existing inbuilt programs and all that is needed is to interface the robot with the trading platform, the right robot would be the one which suits your trading style.
3. The general principal of trading is: higher the profits, higher the risk. So a trader seeking to invest in a forex robot has to decide the expected returns on investment to the risk involved.
4. Test the robot on a demo account on a range of currency pairs. If you don’t find them useful, you could always replace them. Forex robots are available with 100% money back guarantees.
5. Robots normally do not work efficiently in all market conditions. Some of them may work well when the markets are range-bound and some of them in trending markets. So it is ideally advisable to back and forward test these robots to identify in which market conditions it would be suitable to employ them.
6. The next statistic is to identify the average profit size to the average loss size on a trade and compare it to the percentage of profitable trades. If the number after deducting commissions and other charges is positive to the extent of the anticipated return on investment, it would be a good idea to consider that robot
7. Review the drawdown of a forex robot using an equity curve. If the curve looks choppy, the signals generated by the robot are highly volatile causing large draw-downs or losses. However, if the slope is smooth and gradually progressing upwards, the signals generated are less volatile and the draw-downs are smaller.
8. Past results of a robot are not indicative of future performance. So, however good or bad the robot has performed in the past, it is imperative that it be tested by you on a demo account before investing on the robot

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