Forex robots are becoming incredibly popular with beginners and experts alike. Today there is a huge selection of Forex robots to choose from and it can be difficult to tell the good ones from the ones that are likely to under-perform. This brief guide will explain how robots work and what to think about before choosing one for your trading needs.
Risk vs Reward
The most important consideration when choosing a robot (or picking any trading strategy, for that matter), is your own level of risk aversion. If you are happy to take some risks, you will have more options for trading. If you are risk averse, you should stick to tried and tested lower yield strategies.
Forex robots analyse a variety of foreign exchange indicators and you can see how they are performing by looking at their profit factor, maximum drawdown, efficiency and expectancy. Overall, the performance of a robot is rated using its robustness. Before you pick a robot and commit to using it, though, it’s important to understand the markets yourself. Foreign exchange robots are at their most efficient in particular kinds of market. If a robot works best when a market is range bound, you shouldn’t rely on it in a trending market and vice versa. If you don’t know how to tell what is going on in the markets, learning basic trading terms and patterns for yourself should be your first priority. Robots still need humans to back them up.
Robots are not designed to completely remove the human factor from the forex market. You should test your robot on a demo account before running it for real and you should watch the actions of the robot and the trends of the market carefully while you are using it. Your robot will make decisions for you and it will be able to respond when you aren’t around, or make trades more quickly than you can even when you are at the keyboard. However, it is your job to stop the robot when the market changes conditions and to see the big picture. Don’t risk a huge amount of capital on an untested robot and don’t stick slavishly to the robot when the foreign exchange market is clearly against it. You will make more in the long run if you take your profits and wait for the market conditions to change once again.