What are forex trading robots? The name may sound a bit obscure and for the avoidance of doubt it isn’t any of those robots that are showcased at Japanese technology fairs that will clear your house or play the trumpet (btw, I saw of those in the Toyota factory in Japan close to Nagoya I think, and they were awesome!).
Anyhow, back to us. A trading robot is a piece of software that will help you with your currency trading either when you are not around or when there are too many market events for a human to be tracking. Many of us have very busy day that don’t allow us to be sitting in from of a computer for hours on end, especially considering the forex markets are open 24 hours a day, 5 days a week! So a robot can both save you time and make you (more money). Such a system will make educated trading decisions based on the analysis of market data and the rules it is programmed to follow.
You may be wondering: “If forex trading robots are placing trades on my behalf, automatically, how risky are they?”. Fair question. Unfortunately, as when you trade yourself, forex trading is as much an art as it is a science so yes you are taking a risk that the robot will lose money. Exactly in the same way as you are taking the risk of suffering a loss when you put on a position yourself. Whether that risk is larger or smaller if you are trading yourself versus if you have some forex trading robots doing it for you depends on how good the robot is and how good you are at controlling your own emotions. But I’ll touch on that later in my newsletter if you are a subscriber.
One of the biggest disadvantages of forex trading robots is the person operating it! In other words, one of the biggest downsides if that the trader relies too much on the automated system. First of all, like humans, robots are not perfect. They make decisions based on past performance, which is not guarantee of success for the future. You have to actively monitor what the robot is doing. This leads us to the second problem. If you use it as a completely automated system you will never learn to trade yourself, which means you will never recognize when the robot is doing something wrong.
A large part of trading success comes from good money management. And money management is not something you can automate through a forex trading robot. No software can tell you how much money you can afford to lose. And as you will know, only invest the capital you can afford to lose. This means you will also be less emotionally attached to your trades.
Forex trading robots can be excellent tools in helping you trade forex, as long as you realize they are just tools. A great way of starting is to dome some trading yourself and use a forex robot alongside so you can compare both trading styles and learn from both at the same time. In my newsletters I detail what are the 7 key factors that any trader must learn to be successful that will help you in using forex trading robots to your profit.