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The subject of forex robots is very predominant lately in the Forex market and is particularly tricky. For this reason many traders ask me if forex robots are for real. Before we begin, we must define what trading robots are. Apparently, the biggest business in this environment is the development and analysis of trading Forex Robots (Expert Advisors - EAs). An Expert Advisor is an algorithm, or simply put a program developed in MQL4 executed in the trading software MT4. The problem with robots is that prices do not always behave the same way. Sometimes they move in range trading and sometimes they trend. The change from one form to the other can sometimes have detrimental effects on a robot. Finding a profitable robot can be a complicated task but not impossible and when you do the prospects are really great! However, if not careful in your choice you could be faced with a couple of problems. Forex Robot Defects A trading robot is supposed to automate a trading system, i.e. the set of rules for buying and selling currencies to make profits in the Forex market. The problem is that by automating robots, inevitably the defects of these systems are also automated. Let us go through some of the problems that can occur when trading with Expert Advisors. Drawdown Factor Often a trading robot generates too strong positions which can potentially lead to severe losses. Indeed, if the account is emptied by a margin call caused by a significant drawdown, it can no longer provide sufficient margin to continue to trade and generate profits. Not Adjusting to Market Conditions A robot is a machine and operates like one. It can therefore not adapt to changes in market conditions, as it will function the way it has been programmed to. Do avoid this problem, programmers have found several solutions: - Scalping - Martingale and hedging In all cases there are drawbacks. In the case of scalping, an activity that involves taking positions only for a few seconds if the price moves sharply in a very short time you can lose a lot compared to the usual gain (1-2 pips). Too many open positions at the same time Often Expert Advisors do not adapt very well to each account: - Too many open positions - Very high Leverage In case of a sudden market in the wrong direction, a whole account could literally vanish in to time. The problem of back tests Vendors have two choices to advertise the praises of their algorithm: - Display backtests - Show the actual performance of robots on a real account Regarding the backtests, you must know that when you are not scalping, the results depend a great deal on the structure of the market for the periods corresponding to the test. The fact that the market is trending or ranging influences the result. Often, the period chosen does not contain enough rate configurations. In addition, there is a real problem of data quality. Just on MT4 there are 3 ways to use historical rates. These are just a few of the drawbacks with regards to Forex robots. As mentioned in the beginning of this article, automated trading is a reality and significant profits can certainly be made on auto-pilot. However, you choice of a Robot is the very first step to a successful investment or else a bad choice will literally destroy your account. Hi traders Johnny here! If you liked my article make sure to sign-up for Great Tips and Advice, Interviews with Trading Experts and much more! CLICK HERE To Get my FREE REPORT and "Discover the 21 Secrets To Choosing The Best Forex Robots on The Market" and Trade on Auto-Pilot!.
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