Traders who need assistance with technical analysis often get help from forex trading robots these days. A forex trading robot helps achieve automated trading using a computer algorithm. Many also call it an expert advisor or algorithmic trading system.
These robots are capable of trading 24 hours a day and are available in abundance online. But can they truly help a trader maximize their profit or mitigate risks? And if yes, how do they work?
This article highlights the various factors relating to forex robots, their types, and how they can help retail investors.
Automated Trading Strategy
The use of a set of rules for buying or selling currency pairs usually constitutes a forex trading strategy. Most traders create such a strategy and implement it manually, but many others use computer programs to do the same.
Such automated trading methods use FX robots or bots. It is worth mentioning that these are not physical robots but specialized computer programs used to carry out different trading functions.
The functions can be informing the trader when to place a call or automatically doing it on their behalf. These can have a design that is custom-built by the trader or a readymade one. The trader can include their trading strategy in the former, while the latter has standard trading rules built in.
An interesting aspect to consider here is that a ready-made system is a quicker and easier solution vis-à-vis a custom-built one. Also, if you have limited forex trading experience, then a readymade one would be better for you any day.
There are numerous forex bots in the market. However, it is advisable to go with a reputable option.
It is also noteworthy that forex scams are a common phenomenon these days. It has led to most people being suspicious – is forex trading legit or a scam. Therefore, you should do proper research before making a purchase decision. Some services help get back your scammed money but being cautious is any day better.
You should understand the chosen robot properly and ensure it is in sync with your goals. The things you can consider are:
You can check for positive user reviews and testimonials for your opted forex robot.
The robots should have a history of undergoing backtests on a set of currency pairs in different markets.
Drawdown is the difference between low and high points for a specific period and can vary from one trader to another.
Some robots can handle up to a specific order size, so select the apt one that supports your objective.
You can select a robot that shows live trades instead of simulations.
Types of Automation
Forex trading robots can perform a broad spectrum of functions. At times, simulations with millions of varying forex charts are possible with the help of these robots. Such a task is unthinkable for a human to accomplish.
While some robots send signals to traders, others can act upon those. It can include the ideal time to trade as well. There are two types of automated trading systems:
A fully automated trading system can carry out their trades on behalf of the user based on the predefined parameters. It can set a profit target or stop-loss order in action as per the inputs. You can get numerous benefits from such a system:
- Faster identification of market opportunity
- Better adherence to set goals and plan
- Allows the user time to engage in some other activity
If you have a time crunch, a fully automated trading system is ideal for you. However, it is crucial to note that it needs monitoring and cannot do everything by itself. The best in the market also do not have a hundred percent success rate and cannot replicate humans.
A semi-automated trading system analyses the market and sends signals to the user. It also uses a predefined set of parameters. The user has to take a call to take that trade forward and punch the order manually.
It saves the user time by doing the preliminary research and is ideal for those with time to devote. It allows users to maintain control of the trades and get help in the research leg.
Therefore, as you can see, being aware and choosing the right forex trading robot can be beneficial. It can help take care of your research and give you control over your folio. A crucial aspect to always keep in mind is to choose the right robot and not fall prey to fancy claims.