If there was a guaranteed way to make a profit in the Forex market, every trader would be a millionaire. Expert advisors, also known as Forex robots, can facilitate your success and make some decisions for you.
So, how much can you expect from EAs, and are they really reliable?
Definition of Forex Robots
Forex robots can be integrated into popular trading platforms. These algorithms are promoted as systems for autopilot trading, and their performance is based on the signals they collect. An EA can take different decisions and actions on your behalf, including entering, managing, and closing trades.
The global financial markets are constantly in motion, and trading can become overwhelming. The higher your volume, the more you can potentially earn (or lose). This puts pressure on traders, and they make irrational decisions on the spur of the moment. The main reasons for using an Expert Advisor include:
Mistakes in Forex can be expensive, but robots have an obvious advantage — their decisions are based on data, not feelings. They eliminate the psychological burden.
2. Deeper and Faster Research
An algorithm can process immense amounts of information at once. It forecasts market movements based on more data than any human.
3. Trading 24/7
Algorithms work around the clock. They never get exhausted or distracted.
4. Advanced Strategies
A robot can be programmed to follow any strategy, even the most complicated ones. EAs also facilitate backtesting and do not require any special skills from their users.
Overview of Drawbacks
Today, there are thousands of Forex robots, and they are not created equal. Some of them are sold by scammers, others may grossly underperform. Generally, whenever an expert advisor is advertised as a way to get money quickly and easily, you are looking at a misleading offer.
To understand which robots are worth buying or renting, do your homework. Devote some time to research customer feedback and expert reviews. Acknowledge the main limitations of Expert Advisors, including the following:
1. Problem with Turbulent Markets
Software for automated trades is most effective in clear market conditions when the trends are strong. During highly volatile and erratic periods, the accuracy deteriorates.
2. Problem with Fundamental Analysis
Forex robots work based on technical analysis, not media information. While you may be able to foresee dramatic reversals due to economic or political changes, an algorithm will not do the same.
3. Most Robots Are Scalpers
In scalping, a position may be open for seconds, as the trades are incredibly short-lived. The focus is on their frequency, rather than size. If this is not your favourite approach, EAs may not be useful.
To Sum Up
It is up to you to decide if you should integrate a robot into your trading system. Consider the benefits and drawbacks carefully, and do not expect miracles. EAs will not make you rich overnight, but they can definitely enrich your strategy.