A Forex robot is an automated software that executes trades on the trader’s behalf, running as an Expert Advisor (EA) on their trading platform. Do you really need these services? Is there any real advantage to using them? Read this before making a decision.
Most of this software is built around the most popular trading platform, MetaTrader 4. The software usually allows traders to tweak certain settings to their liking in order to change things like stop-loss limits, the times when the bot can trade, etc. Some traders see automated trading software as a great tool because it reduces the need to constantly monitor trades, or it can help beginners to turn a profit without much knowledge about the Forex markets. On the other hand, some traders would tell you to avoid automated trading software because of the associated risks. Below, we will highlight some of the pros and cons of using this software so that our readers can decide for themselves.
- Forex robots help to ensure that traders never miss an opportunity since they can trade 24/7 with no breaks. Any human will need to eat, sleep, and so on, but traders won’t have to be afraid to leave their PC with automated software running.
- Automated trading robots do not fall victim to psychology-related downsides as humans do. The robot will not feel greed, excitement, anxiety, or any other emotions, which helps to avoid emotion-based trading mistakes.
- Robots can find opportunities and carry out trades in a matter of seconds, thanks to pre-determined parameters. Humans are slower at inputting manual trades and making decisions, which can cause missed opportunities.
- Robots can keep up with more complicated trading strategies and are superior at multi-tasking. The bot can monitor several currency pairs at once while keeping up with multiple conditions related to stop-loss orders, entries, and exits, profit targets, etc. Once again, humans are not as capable of doing this and may become overwhelmed with information.
- Trading robots can be used by beginners without the need for extensive knowledge. Since the robot does most of the work, entry-level traders can spend more time learning, while making a profit in the meantime thanks to the trading robot.
- Many trading robots that are made to be purchased aren’t profitable. A company may promise their product will make you rich before disappearing a short while later. Always research any company or person that is selling a bot before buying to try to avoid this.
- Many bot providers advertise the absolute best results they have achieved to make the product look more successful or reliable than it is. They might advertise one successful backtest out of hundreds to fool their potential customers.
- You’ll need a strong internet connection for trading robots to run effectively, otherwise, the robot may glitch and experience trading errors.
- Robots are at a disadvantage to humans because they will only ever work the way they are programmed to. A robot will never be able to learn new things or apply their imagination when trading the way that a human could.
- While robots are great at analyzing technical data, like charts and statistics, they can’t take economic circumstances, political events, or other important events into consideration. Traders should manually turn off their trading robot before any such event or else fall victim to errors.
- Robots work best when there are positive trends and signals in the market. If the market is trending, then there is no problem. However, a sideways or choppy market can throw the robot off track.
- Many robots use a scalping-based strategy, which might not be allowed by every Forex broker.
- The best trading robots aren’t going to be available for free, although some can be rented for a low price for a month or so. If the bot can’t be rented or tested, then you’re basically taking a gamble with hopes that the product works.
Forex robots can trade 24/7 with a strong internet connection and are much better at multi-tasking than humans. Emotion doesn’t get in their way and they can perform much more complex trading strategies with less missed opportunities, but they aren’t without their faults. Many of these options are scams, so thorough research is a must before purchasing. Robots also don’t have the capabilities to learn or take things like economic events into consideration the way humans do. If the market doesn’t have positive trends and signals, then the robot’s efficiency will likely decrease. Still, with monitoring and risk-management, automated trading software can prove to be a convenient and profitable option for most Forex traders.