Automated Forex Trading

Following the deregulation of the Forex market, offering small investors and traders the chance to trade the Foreign Exchange, we have seen a dramatic increase in automated Forex trading systems. These offer the trader the ability of a ‘set and forget’ trading methodology, where the trader installs a Forex robot onto their trading platform, selects their criteria and the robot takes over. ..well that’s the theory.

This is likened to finding the Holy Grail, and though there are some very interesting Forex robots on the market, independent testing by experienced traders has exposed many flaws in the claims made by the vendors.

Most of the Forex robot sales claims are based on ‘back testing’ results and depending on what platform you are using and the accuracy of the historical charts you download, these will and do vary wildly. We have never yet been able to duplicate the results claimed on a sales page. Some Forex robots we have tested were incredibly efficient in wiping out our demo account, so tread very cautiously.

Demo accounts also have the reputation for producing much better results that live accounts. Demo accounts will always fill a trade, whereas live accounts are subject to spread variations, slippage, and liquidity, plus broker quirks and lot sizes, just to mention a few influences. So taking this into consideration, if a Forex robot wipes you out on a demo account, how do you think it will go live???

Much as I would love to, I am not going to list the Forex Robot failures, to put it simply, I don’t want to get sued!

How does an Automated Forex Trading system work?

Each is different and reads different signals, but put simply, an automated Forex trading system reads and interprets its own preselected series of indicators, then determines entry and exit strategies based on these signals. It opens a trade automatically, based on risk management factors and attempts to make a profit. It will also close the trade, either based on a profit margin or a stop loss position.

Most of the modern Forex robots work on Metatrader4, which is a very common trading platform and they require narrow spreads, often 2-3 pips, occasionally up to 5 pips. Some have pre-determined time frames; M5, M15 or 1H or similar, and often need time to “bed down” before they start trading. Some Scalp, which is taking small quick trades and others trade over longer periods and all will have loosing trades. You just have to make sure they have stop loss strategies built in, some don’t, so check carefully!!

This is another way Forex robots make their results look good. Without a stop loss strategy, they allow uncontrolled draw-downs, keeping the trade open until it turns and comes back into profit. If the draw-down is big it can also wipe you out since you may not have the funds in your account to secure the loss, so your broker will either close the trade or demand extra funding.

There are two Forex robots we use and they trade different currencies, so there is no conflict between them when trading. An important note; You should NEVER have different robots trading the same currency on the same account. It is simply an insurance strategy on software conflict, which if it occurs could wipe out your account before you can stop it.

The first is FapTurbo which is a scalper trading EURGBP M15, the second is Forex Megadroid which trades EURUSD H1. We run these two Forex robots on the same account with money we are prepared to lose. Once the account has been doubled, we will withdraw our initial investment and let the robots run, withdrawing funds from time to time as the account builds.

These two robots are regularly updated by their developers, so we constantly monitor their performance and keep them up to date, it’s all part of our personal risk management strategy for automated Forex robot systems.

To find out more about these Forex Robots:

Fapturbo Review

Forex Megadroid Review