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#1 19-04-2021 13:33:24

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3151
Website

Do trading robots really work?

Do trading robots really work?


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What's all this fuss about trading robots? Do they work? Are robots bad? Many questions usually come to mind when one hears the word "robot". Below, we will try to explain forex robots and everything about them, as well as some myths and realities. Let's talk ...

How do Forex robots work?

Before we get into how they work, do you know what a forex robot is? A robot is nothing more or less than a bunch of lines of code with clear rules for entering and exiting the market that are executed automatically. All of this applied to the forex market would simply be an automated strategy that buys and sells in the forex market. They are also called EAs (Expert Advisors).

Main advantages

One of its great advantages is being able to quantify the performance of the strategy that has been programmed. With a programmed strategy, you can backtest and assess how that strategy has performed before. If you have done discretionary or manual trading, you have surely tried different trading systems without having any statistics or results as to whether or not they have worked in the past. You gambled with your money not knowing whether what you were doing was profitable or not. Think for a moment, if you don't quantify, how are you going to know you're making progress?

You need objectivity in decision making when making decisions. Otherwise, your results will be affected by your interpretation and you have a good additional factor to make a mistake. How are you going to fix it? Algorithmic trading systems and robots allow an objective approach to the market.

As you know, accuracy of execution when trading is essential. When you trade manually, you analyse, wait for the right moment, and execute the order. When the process is automated, the order is launched in less than a second, without hesitation, without analysis, without thinking.

Another more than considerable advantage is that in order to execute the trades you do not need to keep your eyes looking at charts for hours. You can do this uninterrupted with a VPS (Virtual Private Server), even if you are not in front of the screen. If you are traveling for a week or have to do something that prevents you from being there, your operation may be performed simultaneously. Be aware, however, that they must be monitored and that building automated systems takes time and effort.

With robots, you can trade different assets simultaneously. Manually, you are limited in this aspect. So you can diversify without any problem.

And of course, there's the psychological approach. As you know, in trading psychology is important and it affects a lot of things. When the strategies are carried out in an automated way, you greatly reduce the psychological component since your buying and selling decisions are not skewed by your emotions. I say it is reduced, because when the robots have negative or positive performance, it affects you anyway. But the main difference is that the results affect your psychology, not your decisions, as is usually the case when you operate on a discretionary basis.

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Main disadvantages

While the advantages are obvious, there are disadvantages. Most of the bots that are marketed on the internet are based on martingales which reflect very good results and almost perfect performance curves, but one day they always end up losing money. Why? Because of the aggressive risk management rules they use. If you don't think so, try downloading some for free and see their results over a long period of time.

Why is this happening? Creating a good, profitable automated system is not easy. Programming a martingale is not easy. So, before you buy a robot, make sure that it does not use these techniques and that it is not hiding behind a brand that may disappear tomorrow.

When it comes to the downsides of trading with robots, one important thing is any technical failures that may arise and cause the robot to not perform well. It is advisable to use a VPS (for example Accu web hosting) if this failure could affect your operation.

While this is something that has never happened to me before, it is something that can happen. It's like when the internet connection goes down. Also, failures or errors when programming the strategy (before executing it in real life, testing it in demo or with a very small capital).

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"Anything worth having is worth going for - all the way." - J.R. Ewing

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