Like many questions about currency performance, the answer can be a little tricky. Certainly, there are individuals and companies that make significant profits from automated trading, but it also has its pitfalls and there are many questionable offers and even a few scams.
There are several forms of automated trading. Starting with the simplest, for example, which is a system of indicators that informs a trader to buy or sell. From there he climbs into a fully automated commercial robot that operates without any other human intervention in its routine actions.
The largest institutions in the market have very sophisticated algorithms that do thousands of trades per minute. However, we don’t have to go that far to get into automation, and in fact, if you have access to a high-frequency trading algorithm, you probably won’t be reading this.
What are EAs and how do they differ from robots?
Automated Trading (AT) is a broader concept that involves activities around automated trading systems. On the MetaTrader4 platform, which is the most popular among forex traders, there are customizable programs that help and can trade automatically. These are called Expert Advisers, or EA.
EA is like a simple way for forex investors to talk about automated trading programs. Some use “AI” and “EA” without distinction, although technically they are not exactly the same. Some traders also speak of “bots”, but now with social commerce, this is going out of style, leading to confusion with robotic social media accounts.
What can a forex robot do for you?
Your trading platform probably has one major limitation: it only follows your instructions. If you are not present because you are a human who has to do human things, such as sleeping, eating and leaving the house even occasionally, you may be missing out on opportunities in the market.
Most trading platforms allow you to add additional programs that can trade on your own. One of these programs can execute your instructions much faster, analyze data and respond faster, more accurately and less emotionally than a human. However, actions are only taken based on the rules and instructions programmed by the designer.
It’s not the program, it’s the programmer
An intelligent trader can use a well-implemented robotic system to facilitate his own trading procedures and benefit both from his own skill and from the strengths in speed and consistency provided by the computer program. Now they are called Apps, or abbreviated as “something”.
The effectiveness of the program in withdrawing profits from the market will depend almost exclusively on the strategy for which it was programmed. Just being a robot does not change the effectiveness of the strategy; they are not artificial intelligence. Although there are some AI-based bots, they are not within the reach of a common trader. When we talk about automatic trading, we mean programs that follow pre-defined instructions.
Therefore, the question of profitability depends on who programmed the robot. However, there are some other positive aspects that are important to consider:
Trading programs have certain advantages
Forex robots or Expert Advisors (EA) can help ease the emotional and psychological burden of trading. A program will follow the formula regardless of an emotional state that may cause doubt or recklessness in a human trader. This consistent and quick response helps to transform a favorable commercial signal into a profitable result. Note that it says “help”, and does not guarantee, because there is no way to predict the future when it comes to markets.
Computer programs also have the ability to monitor more markets and indicators than a person and turning that information into action is also a strong point. Thus, more sophisticated systems can be developed, including coin triangulation and other advanced techniques that are more difficult to process quickly for a human.
Finally, one of the biggest attractions of the robots is the idea of assembling it and letting it run, so that it doesn’t have to be glued to the screen. While there is some certainty about this, you should still keep an eye on your program to fix it and update it regularly.
The other side of the coin
If you buy just an EA or a pre-programmed forex robot, you are at the mercy of someone else’s system design. You will not know when to correct or intervene. When market conditions change, you will need to update it and you may not even know that it is no longer working properly until you have seen a significant drop in your account.
On the other hand, if you create and maintain the system on your own, a lot of work is required to design, configure, test and keep it up to date with market changes. In addition, you cannot code a successful business strategy without first developing a successful strategy. (Well, you can, but who cares about a robot that doesn’t make money?)
You need to be careful
There are many people out there selling standalone systems or forex robots. Most of them will not make a profit if someone with little knowledge or experience in trading buys them. This is unfortunate, as one of the motivations for using a robot is precisely to access more advanced techniques without having to become an expert in them.
Even those that are initially profitable in the short term, will become obsolete very quickly. Obsolete systems mean losing money, so it’s a good idea to be wary of advertising that sounds too good to be true. Particularly when they promise big profits with very little work and preparation.
Thus, we can conclude that:
Automation works best when used as a tool to assist your business strategy. It is unlikely to replace you as a trader, but it can help you achieve greater consistency in your execution. On the other hand, you can also multiply the results of a winning strategy that you are already using. Small advantages make a big difference to your long-term profitability in Forex.