Trading forex manually can be time-consuming and exhausting, while automatic trading is more efficient and can avoid the risk of loss. In this post, we have shared a comprehensive guide on a Forex robot, how it works, the pros and cons, and what a trader should consider when selecting a robot.
What is Forex Robot?
It is a trading software program that is designed to automate trades in the foreign exchange market, which is also known as Forex Bot or EA: Expert Advisor. Traders bolt this software onto their trading systems to analyze the market, make trading decisions, and execute the trade automatically on the trader’s behalf.
Forex bots use AI algorithms to decide the entering and exiting positions, taking custom parameters that traders set into their trading accounts. However, the robot primarily deals in spot trading or immediate trades, but other types of trades are probable, like options, futures, and derivatives.
Consequently, a forex bot is a cutting-edge and more embracing form of trading signals accomplished robotically. It means that a trader doesn’t have to analyze the technical and fundamental data of an asset when eager to trade.
How Does a Forex Robot Work?
Forex bot is built via MQL4 or MQL5 programming language. Bots basically work with the amalgamation of the MetaTrader platform. A trader installs the bot on a Meta Trader 4 or Meta Trader 5 platform, and then it uses historical data and real-time market conditions to analyze the market and identify trading opportunities.
Every trading bot has a specific strategy that depends on if condition or then condition or when a condition or a set of conditions are encountered. The robot then launches the in-built logic pattern, like entering or closing the position.
Suppose your robot targets the XAUUSD pair and activates if the RSI for XAUUSD dips below 40 or goes above 80. When the robot determines that RSI drops below 40 or goes beyond 80, it will instantaneously place a buy order for RSI <40 and a sell order for RSI >80.
However, some robots use much more complicated strategies to maximize returns and reduce risks related to entry and exit positions. Bots can also spot major market trends, monitor local price fluctuations, and track patterns via indicators like moving average, convergence, divergence, and relative strength index oscillator to get the highest yields.
Pros and Cons of Forex Robots
Robots have some probable dodge as they limit emotional trading and maximize your potential to spot as many profitable deals as possible. So here are the key pros of using these robots.
- A robot can combine several strategies at once.
- There is no risk of loss in trading because of emotions like fear or rage.
- Best for both beginners and experienced foreign exchange market traders.
- Robots work 24/7, so there is no downtime if the connection is stable.
- Trail charts, analyze patterns, and take historical background to make effective conclusions.
- Traders can customize the bot from manual to fully automatic trading.
- Automatic scanning lets the trader monetize more tradeable pairs.
One of the main disadvantages of an automatic trading robot is that it can’t be accurate all the time over the long run. Here are the key cons of using the Forex trading robot.
- Completely disrespects its user’s mindset and emotions.
- Requires constant internet connection to work.
- Many robots in the market are not updated.
- If a robot is a mere bite, there is a risk of being scammed.
- Robots can’t forecast volatility; that is why they are less effective if the market is storming.
- Forex market trends are fluctuating rapidly, which may negatively distress some of the strategies.
Things to Consider when Choosing a Forex Robot
Are you selecting a foreign exchange trading robot to automate the trading? So, it is recommended to consider these tips in mind to maximize your chances of selecting a trading bot that is suitable for you.
Traders use the forex robots to get the best trading opportunities and make positive returns. That is why you should consider an accuracy rating of at least 88 percent when choosing a trading robot. You can ask the vendor of a Forex robot about his track record, examined over two years, and see if you get an answer but hold on.
Another thing to consider when choosing a trading robot is the trading opportunities the bot can identify. Robots that scan a larger volume of cryptocurrencies will get more unique trading opportunities. Some software also searches for multiple technical patterns and trends to trade, which in turn increases overall daily trading volumes. Consequently, traders must consider trading opportunities, specifically if they are interested in executing high trading volumes a day.
Robot Policy and Automation Level
Also, consider the strategy and level of automation that a forex robot takes on. Some bots include higher risk strategies while some include risk averse. So, check which rules a bot abides by and check they tally with the investment goals.
However, most of the bots are fully automation means they need access to your trading account. Some bots are semi-automated, which means you don’t need to give access to your trading account. Most traders prefer semi-automated robots as they add an element of protection to the proceedings.
Check the Reviews
It is important to check the reviews of a forex bot before investing in it. Because it is a good indication of how reliable a bot is and how well it will perform in the long run. Reviews also tell you how trustworthy the bot is and how it will handle your asset.
Furthermore, researching a robot review can reveal potential issues. It may arise with the bot, like poor customer service issues with the software or a lack of transparency. You can also search over the internet for forex robot reviews. Many sites review the best forex bots and cover all of their features and performance in detail. So, ensure to read a few different reviews to get a complete review.
The cost of a robot depends on its features and level of complexity; thus, it is important to compare the charges and find the best one. Furthermore, an expensive bot with added features offers more revenue and an improved overall trading experience. That is why it is recommended to consider the cost against the profits. Compare the charges of different forex bots and select the one that provides the highest value for money.