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Automated Forex Trading | Forex Robot Scams

November 5, 2009

The deregulation of the Forex market, now offers small investors and traders the chance to trade the Foreign Exchange and this has given rise to vast array of automated forex trading systems. These provide the home based trader with a ‘set and forget’ trading methodology, where the trader installs a Forex robot onto their brokers charting system, selects their chosen inputs and the robot takes over. ..well that’s the theory.

There are many people who are selling Forex robots who have claimed to have found this Holy Grail, and though there are some fascinating Forex robots available, independent testing by experienced traders has shown up many failures in the claims made by the sellers.

Most of the Forex robot credentials are based on historical ‘back testing’ results, not live account testing and depending on what system you are using and the substantiation of the historical charts you download, these will and do vary wildly. We have never yet been able to replicate the results claimed on a sales page. Some Forex robots we have evaluated were incredibly efficient at destroying our demo account, so approach very carefully.

Demo accounts have always been good at producing much better results that live accounts. Demo accounts will always fill a trade, whereas live accounts are subject to a variety of uncontrollable variables like spread variations, slippage, and liquidity, plus broker quirks and lot sizes, just to mention a few influences. So taking this into consideration, if a Forex robot wipes you out on a demo account, how do you think it will go live???

I would love to, but, I am not going to give you the Forex Robot failures, no, I don’t want to get sued!

How does an automated Forex trading system work?

Each is different and reads different signals, an automated Forex trading system reads and interprets its own series of indicators, then determines entry and exit strategies based on its analysis. It trades automatically, based on risk management parameters and tries to make a profit. It will also close the trade, either based on a profit margin or a stop loss position.

Most of the modern Forex robots require Metatrader4, which is a very common trading platform and they need narrow trading spreads, often 2-3 pips, occasionally up to 5 pips. It is not unusual for a robot to “bed down” before they commence trading. Some Scalp, which is grabbing small quick trades and others trade over longer periods and all will have loosing trades. You must make sure the trading software has stop loss strategies built in, some don’t, so be careful!!

This is another way Forex robots make their paper profits look good. Without a stop loss strategy, they allow vast draw-downs, keeping the position open until it returns to into profit. If the draw-down is huge it can also wipe you out since you may not have the reserves in your account to secure the loss, so your broker will close the trade.

If you don’t want to day trade and would like to use automated Forex trading, there are a pair of Forex robots we use, these two robots are always being updated by their developers, so we constantly monitor their performance and keep them up to date, it’s all part of our personal risk management strategy for automated Forex robot systems.

To find out more about these Forex Robots, we review them on our new Blog, you will also find other forex trading Tools.

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