Forex robots refer to computer software programs that generate automated trades after analyzing the market based on pre-defined user settings. Many major institutions around the world use computerized software to automate their Forex trades.
The majority of bank settlements completed in the trillion dollar a day Forex market are done electronically. The shift towards automation allows banks to cut costs while employing select expert analysts to program the software for them.
However, what are the pros and cons of using Forex robots for the every day trader .
Understanding Forex Robots used in a Forex Trading Platform Online
Forex Trading Robots
As mentioned previously, Forex trading robots automatically make trades based on a set of trading signals. The Forex robot determines when to enter and exit a market using a set of criteria specified by the user. Although, the user typically programs the set of criteria but it can also be created visually without programming.
There are two common types of automatic trading: Fully automated forex trading, and Signal based automated trading.
In fully automated trading, the computer algorithm determines the price, timing, and quantity of the order. The Forex robot initiates the order automatically. Users just have to tweak technical parameters and the computer program does the rest.
On the other hand, Signal based trading generates trade suggestions based the signals triggered by certain price points in the market. The trades are not made automatically. The user manually executes the trade based on the suggestion of the Forex robot.
Advantages of Forex Robots
Using Forex robots online entail certain advantages and disadvantages. You should be aware of the pros and cons of using a robot before actually using it to trade the markets.
The foremost advantage of using Forex robot is that it takes the emotional aspect out of trading. A Forex robot will execute the trade based on the signal provided by the user. It will make order regardless of minor deviation that may otherwise have confused even the most professional of Forex traders. This tool will help the trader to avoid panic when making trading decisions. For instance, it will not close a trade based on fear that the trading session opened a little higher or lower than usual. Automated software will help the trader to execute strategies based on pre-defined rules rather than pure emotion. It enters and exits a trade based on the signals.
Another great yet obvious advantage of using Forex robot is that it remains fully functional 24/7. It does not sleep and keeps on trading both during the day and during night. Using such software, you do not need to keep a constant watch at the market. You just let the Forex robot keep an eye on the market for you.
Another benefit is the ability to backtest various trading ideas. Such backtesting can be performed in a matter of minutes on multiple currencies. The Forex robot can track dozens of currencies making it easy for you to employ hedging strategies. You can set multiple ending and exit points. Although human brain is unique, it is weak when it comes to multitasking dozens of different activities. The Forex robot performs this task with ease while reducing common human errors.
Disadvantages of Using Forex Robots
Forex robots need 24/hours internet connection to execute trades automatically. In addition, the server that hosts the Forex robot should be reliable and offer maximum uptime. A delay or glitch in the server may cause Forex robot to make wrong trades.
In addition, automatic trading works best during trending market. Forex robots may not operate as effectively when the market is moving sideways.
Furthermore, there are a lot of poorly designed forex robot programs on the market. So buyer beware, as some of these programs are merely scams to get you to make monthly payments to an online marketer. Be very carefull before buying just any online trading software.
To sum up, Forex robots offer traders the ability to act on market opportunities 24 hours a day. You do not need to constantly monitor the market to exploit favorable price movements. The Forex robot executes order at the most opportune time resulting in maximum profit from the trade. It also takes care of emotional aspects when trading in the online Forex market thereby minimizing the chance of making bad trades.
However a drawback of using FX robots in a trading online platform is that it may make wrong trades in case of server downtime.
The best option is to find a reliable online trading platform that provides you with all the necessary trading tools, charts and technical indicators.
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