Forex Robots – Advantages and Disadvantages

17.06.2015 Learn Forex Trading No Comments

There is a huge market offering automated Forex trading systems, expert advisors and forex robots trading instead of a trader himself. But is trading with no emotions, keeping the strategy, keeping the rules and not being influenced by the trader’s psychology effective?

Forex Robots

If you are not a trader yourself or do not have any fixed trading strategy, you can buy a forex robot. There is a huge market with forex robots today, you may choose according to the price, results, drawdowns, trading times, the variety is almost neverending. All these robots are said to be “guaranteed” but are they really so effective?

Advantages of forex robots

Automated trading systems are usually based on a manually developed trading strategy. They are able to simplify the trader’s work, these trading robots watch the market constantly. They are usually located on a server not being influenced by internet connection breakdowns or electricity blackouts. They watch the market 24 hours a day, 5 days a week, they are able to catch the entire chart movement based on their settings. This is a huge advantage of forex robots. Moreover, traders do not have to sit at their computers and watch the markets. These robots do the job for them.

Most of these robots always start to trade into profit. I have personally seen and developed dozens of robots and 95% of them started to accumulate profits very quickly. You simply do not have to take care of the news, of the trading time, price, … anything. All the job is being done while you are sitting in your living room. This is all fine.

You can also take any strategy you have and transform it into a trading robot. You can even eliminate some time periods when you do not wish to trade, for example at night or during the news. This is all possible, you can even invent several separate trading robots based on opposite strategies so that when one does not work, the other one will take profits. Does it sound good? Yes, it does.

Disadvantages of forex robots

However all the robots work on a certain market situation. Whether you realize it or not, every trading strategy is based on a certain market situation, when trading manually, you simply wait and watch the market and when the market situation is what you want and when the trading setup you are looking for has occurred, you just trigger your trade.

With the forex robots, the situation is a bit more complicated. You can start your robot in the market situation you are waiting for. When you accumulate your desired profit, the positions will be closed in profit and the robot restarts, sooner or later the automated trading system will get into a situation which is completely different from the situation it was designed for and here the trouble starts.

Before you recognize that the situation is changed, you will have several open positions and they will be in a loss. The forex robot waits until it gets into profit, that is its mission. You can either manually intervene into the robot which is what you do not wish to do or wait what happens. And I can assure you that sooner or later, the number of trades will accumulate, the minus will increase and the robot will lose much more money than it in fact earned.

We have developed dozens of automated trading systems based on various trading strategies, running constantly 24 hours a day or running just in the selected time intervals, but all of them ended in quite serious minuses in the end of the game.

The only problem here is that you are not able to detect in time when the market situation is changed and as soon as it is clear that the market situation is no more what the robot was designed for and you know that you should start a new robot designed for this trading situation, the first robot is in serious loss and you start to lose money. The market analysis with forex robots is difficult and this is a neverending cycle.

Before you buy or start an automated trading robot, you would need to run for at least one year on a small live account to see whether the robot is able to manage all the trading conditions occurring throughout the year.

Manual trading being number one

In the end of the game we came into conclusion that nothing can replace manual trading and the trader’s market analysis which is always necessary to trigger your trade and to trade into profit from the long/term perspective.

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Forex trading is connected with a high level of risk, read our Risk definition

Risk definition

Forex trading is connected with a high level of risk and may not be appropriate for all the investors. The high degree of leverage can be and advantage or disadvantage. Before you decide to trade any such leveraged accounts it would be reasonable to carefully consider your investment objectives, level of experience, and risk you can afford. It is possible that you could sustain a loss of some or all of your initial investment that is why you should not invest more money than you can afford to lose. You should learn all the risks connected with the market trading and advise with an independent financial advisor in case you are not sure what you are doing..

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