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Do Forex Robot Traders Work?

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Do Forex Robot Traders Work?    
Technology has played a vital role in the development of the global forex markets. Before the advent of the internet, trades had to be made in person or via the telephone, and the fluctuations in the value of a currency would be disseminated by more traditional means than a broadband connection. This meant that access to the forex markets was much more limited than it is today and that the chance of making profits from small and short lived changes in the relative values of currencies was far more limited than it has since become. The advent of data driven, broadband communication helped to create a genuinely global, round the clock market place, and also to open up the world of forex trading far beyond the large institutions which traditionally had a stranglehold on the markets. This made it possible for individual retail traders to profit from their ability to interpret the ways in which currencies move in response to wider changes in the economic or political situation of the country in question. All a retail trader has to do is look through the many brokers available, weigh up the various features such as bonuses, fees, commissions and the type of platform used, and then decide if they want to make use of a forex robot trader.   

As this technology has developed the rise of automation has begun to impact on forex trading as it has in so many other areas of society. Interpreting the forex markets is particularly suited to the kind of algorithms which lie at the heart of automation, in that it relies on the ability to gather and analyse large amounts of technical detail which flows at a great rate and is often fairly repetitive in nature. The term ‘forex robots’ may conjure up visions of some kind of automated figure seated at a computer terminal tapping away at the keys but the truth is actually somewhat more prosaic, although no less revolutionary when set against the longer history of forex trading.The reality of a forex robot is that it is a highly specific programme or piece of software. It uses the mass of signals which are available to anyone who is trading. These could be:

  • News signals responding to topical events which might impact on the strength of a currency. A recent example of this would be the vote in the UK Parliament which, ostensibly, blocked the chances of a no deal Brexit. Upon this news, the value of the pound rose, although it soon fell back thanks to the on-going uncertainty of the situation. This kind of temporary blip is exactly the kind of signal a forex robot would be looking for.

  • Technical signals which are more complex than news signals and are based on factors such as underlying market trends measured over various periods of time.

  • General trade signals pertaining to market conditions at the time.

The algorithms which the robot is based upon interpret the vast amount of information coming in and then either pass that interpretation on to the dealer in the form of trading suggestions or – and it is here that the term ‘forex robots’ really comes into its own – the software makes the trade.     

Another term often applied to the kind of automated trading software under discussion is Expert Advisors, or EAs. These operate on the highly popular MetaTrader platform and they are given this name because they ‘advise’ both the trader using them and the MetaTrader software when they are going to open or close a particular position.
The point of forex robots is for them to be able to make a profit for the trader concerned without that trader having to intervene once the robot is up and running. This doesn’t mean that the trader is handing responsibility over to the robot completely, of course, since the trading decisions taken by the software will be based upon a trading plan initially set out by the trader. On the basis of this plan, the robot will seek out the best entry and exit points for trades and calculate the size of every position taken.

How the robot makes decisions
The decision taken by the robot will be based on a set of parameters decided by the trader. These parameters will form the backdrop against which technical signals are interpreted, alongside an analysis of the present market conditions – relating to factors such as interest rates – and what those market conditions have been in the past. By combining the signals with limits set by the trader and an on-going analysis of the market, the robot will decide whether to buy or sell and, if the system is fully automated, will makes those purchases or sales. In simple terms, the trader will set out an ideal scenario within which they would make deals. When the various factors to be considered align so as to meet that scenario, the robot will make the deal in question. The fleeting nature of such an alignment, allied to the fractions of a second in which robots can work, are the reason why some traders find them so useful.  

The best advice that can be given to any trader thinking of using a forex robot is to do their research. Decide whether you want to work with the kind of forex robot that is completely self-contained or the Expert Advisor model which works with independent trading and market monitoring software. In many cases, it is possible to download Expert Advisor software and then run it using a demo forex account of the kind recommended for people new to trading. Since trading with robot traders is an entirely new concept when compared to ‘manual’ trading, a demo of this kind would not only demonstrate the effectiveness or otherwise of the robot in question, it would also allow the trader to familiarise themselves with this way of dealing with the markets.  
The clear advantage of using a trading robot is that it enables the trader to concentrate on other things while the trades take place around the clock. This is particularly advantageous for those traders who still have a ‘day job’ and are yet to reach the stage at which they can become full time professional forex traders. In addition to this, the trading carried out by a robot will be immune from any of the kind of emotional impact which sometimes leads to traders chasing losses or risking too much of their account when the market seems to be moving in their direction.   

The answer to the question “Do forex robots work?”  is probably; yes, but only up to a point. If automated systems were all it took to generate huge profits from the forex markets then it’s safe to assume that the largest corporations would have invested in the best and fastest robots and nobody else would stand a chance. The truth of the matter is that AI, software and robots can all play a part in gathering and analysing vast amounts of data in a way which human traders struggle to match, but that ultimately markets of any kind are human constructions based on the psychology of the people working within them. An understanding of that psychology and how it will lead markets to react to specific real world events is always going to be at least as useful as even the best data analysis when it comes to staying a couple of steps ahead of the market. The best course of action may well be to utilise the power of a robot trader by all means, but make sure that you’re always the one in charge.

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