A forex robot seems an interesting tool for your trading, and every blog and every video you see about them makes you wanna try.
You see there’s a hyper around them. Everyone seems to be talking about forex robots. They make it look like everything is possible for forex robots.
However, when most beginners think of a forex robot, they see themselves relaxing in a hammock while a robot places trades for them.
But there is more to that!
In this guide, we’ll talk about forex robots, how they work, and their pros and cons.
What’s a forex trading robot?
In case you don’t know, a trendonex forex trading robot provides you with a range of forex trading signals to help you decide entry and exit positions.
Basically, they automate your entire trading process.
Most of these robots are created with MetaTrader and the MQL scripting language, allowing you to produce trade signals, place orders, and handle trades.
The forex robot works automatically with the push of a button, executing trades based on historical data.
They automate the process regardless of whether you are sleeping or browsing the internet.
A forex robot can, for instance, execute the trade for you if you decide to buy GBP/USD and program it to enter and exit at specific times and prices.
How do forex robots work?
So, how does a forex robot work? Let’s find out.
Forex bots can scan and compute data points in a way that humans cannot. They look for past patterns and execute trades on your behalf. Thye also gives you a clear picture of trading signals.
They are built with certain features that are essential in making trade decisions. For example, using embedded trading signals, they determine when it is appropriate to trade or not trade.
Many traders are attracted to them because they seem like they can be activated, walk away from, and produce money while they are sleeping on the beach.
Some points to consider regarding forex robots
When most people hear about FX robots, they see them as some sort of Aladdin lamp. They think like rubbing the profitable trades out of it.
They are, however, robots, not humans, at all times. Although they can monitor trades 24 hours a day and reduce emotions in trading, they will always be automated machines in the end.
A fundamental concern is that FX robots and their pre-programmed thinking do not account for constantly changing market conditions.
Market behavior is lively, always fluctuating between three potential directions: up, down, or sideways.
The majority of robots are not built to function in all situations. They are not built to identify changes in trading circumstances. It results in loss, and they can be impressive if you oversee or monitor them.
Do forex robots really work?
Ok now that you know what forex robots are, and how do they work, let’s find out if you can rely on them.
The answer to this question depends on several factors. Here are some of the points you need to check to see if a forex robot really works.
The passing of the demo test
For a robot to be fully functional, it must undergo a demo test.
Demo testing includes putting a robot through its paces. If it fails a demo test, it isn’t good for your real account.
One thing to remember is that just because a robot produced continuous gains on a demo account does not indicate it would perform well on a real account.
It is because actual trading differs from demo trading.
You should not, however, pack up your stuff and forget about the forex robot.
If a forex robot did well on a demo account, chances are it will perform well on a real account as well.
Back-tested
Forex bots that have been back-tested outperformed their peers.
Back-testing is the process of examining a forex strategy using past data.
As we already know, a robot can compute the data scores in a couple of seconds. However, how will it work successfully if it cannot back-test?
That is why a successful bot has been back-tested.
Has minimum drawdown
In trading, a minimum drawdown is a decrease in your trading capital.
Keeping your account from losing money is the entire purpose of your trade. Or, at the very least, your wins should exceed your losses.
Since there will be more wins if a robot’s drawdown is low, it will generate revenue.
On the other hand, certain robots increase profitable trading but have a maximum drawdown.
Even if they make six figures every year, they have more losing trades than winning trades. As a result, they will not function for you.
Multitasker
As previously said, a forex bot can execute countless calculations in the blink of an eye.
If a robot code permits it to multitask, chances are it will provide you with extra options. It sets the door for several trading techniques.
For example, if a robot can detect signals from all oscillators, it would initiate several trading positions for you, resulting in more profitable possibilities.
Positive reviews
Many developers brag about their robots, showing their clients huge profits.
This, however, is not always the case.
Before you choose a robot, you may compare its ratings or look at its history statistics on Myfxbook to see how it performed in the past.
A profitable robot will have positive evaluations on sites like Trustpilot, and its chart on Myfxbook will show you how much a robot is worth.
Recovery setup
Forex robots can recoup losses by establishing a trade in the other direction.
This is known as hedging.
Markets can be volatile, and even a robot can’t stop them. It can, however, help to balance the trade.
By hedging, a forex robot opens a long and a short position. It provides you with a short-term hedge against losses. Ideally, there should be more winners than losers.
At the same time, a forex robot opens a sell position. What it does is it takes the opposite side every time. So, in either scenario, you have a winning trade. Therefore, it will act as a barrier, protecting you from harmful price moves.
Cyclic terms
The forex market moves in cycles. Human conduct causes these rotations. Market patterns tend to replicate themselves.
You will never see a forex pair move in one direction. Instead, it can travel in one way for a short period before switching to the opposite direction.
So, how does the forex robot react to cyclic terms?
These tendencies will be tracked by forex robots, forecasting future price changes. Furthermore, they can distinguish different phases of the pricing, providing you with a comprehensive picture.
Pros of using a forex robot
- A forex robot manages and can place trades on your behalf. It is super beneficial for those who don’t have time to constantly monitor their trades.
- As mentioned earlier, the market moves in cycles, so a robot can help in predicting these market cycles, and can easily recognize historical patterns.
- The biggest advantage of using a forex robot is it leaves emotions out of trading. Trading on emotions is one of the reasons why many traders fail. A robot helps in mitigating emotions out of trading.
- While we humans can get tired sometimes, a forex robot never tires. It can execute millions of trades without stopping.
- With a forex robot, you can easily manage multiple trading accounts at once. It can help you in diversifying your portfolio.
Although the benefits seem amazing, robots do have certain downsides. Let’s take a look at some of the cons.
Cons of forex robot
- A forex robot requires a constant internet connection. This can expose a robot to hackers and computer viruses.
- Some forex brokers don’t allow the use of a trading robot for their platforms.
- A robot may not be able to detect market patterns the way humans can.
- A forex robot can come with a heavy price tag.
So, do forex robots work?
Yes, considering all the factors, a forex robot can create a passive income.
It will use all of its intelligence to buy and sell at certain periods, generating profits in the process.
However, you should conduct a considerable study before getting one with all of the hype surrounding forex robots.
It’s ideal if you can program your forex robot. However, if you can’t just read its reviews, examine all the reasons we discussed above.
You must select a bot that matches your requirements and is reliable in trade execution.
Final thoughts
Forex robots do work; but, if you are a newbie, we recommend that you first learn the fundamentals of trading. It will allow you to understand the market moves. Once you understand the market movements, you can use the forex robot more effectively.
