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

Many are wishing for this Holy Grail, and though there are some very interesting Forex robots on the market, extensive testing by experienced traders has highlighted inaccuracies in the claims made by the vendors.

Most of the Forex products sales claims are based on historical ‘back testing’ results, not live account testing and depending on what broker software you are using and the accuracy of the historical charts you obtain, these will and do vary wildly. We have never yet been able to mirror the results offered on a sales page. Some Forex robots we have evaluated were quite brilliant at destroying our demo account, so tread very cautiously.

Demo accounts also have the reputation for 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 cleans you out on a demo account, how do you think it will go live???

Much as I would love to, I am not going to list the Forex Robot failures, to put it simply, I don’t want to get sued!

How does an automated Forex trading system work?

Simply, 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 should have narrow trading spreads, often 2-3 pips, occasionally up to 5 pips. It is not unusual for a robot to “bed down” before they begin trading. Some Scalp, which is grabbing small quick trades and others trade over extended periods and all will have loosing trades. You need to make sure the trading software has stop loss strategies built in, some don’t, so double check!!

This is another way Forex robots make their paper profits look good. Without a stop loss strategy, they allow uncontrolled draw-downs, keeping the trade running until it reverses and comes into profit. If the draw-down is huge it can also wipe you out since you may not have the money in your account to hedge the loss, so your broker will close your account.

If you don’t have the time to day trade and want to use automated Forex trading, there are a couple of Forex robots we use, these two robots are constantly updated by their developers, so we constantly monitor their performance and keep them up to date, it’s all part of our trading 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.