This post was most recently updated on May 15th, 2019
What are automated these days? Pretty much everything, toll booths, self-checkout lanes at grocery stores anything that becomes tedious for human hands and minds. You’ll always get both camps divided on how effective these tools are for Forex trading. Notice I used the word “tools” because, in my mind, that’s what Forex Robots are, a tool to help you trade. Forex robots are just another method and system to trade currency instruments.
Allow your testing of the Forex Robot to prove it’s profitability
In simple terms, the EA Robot will either have a positive expectancy and should be profitable over time, or have a negative expectancy and be a consistent loser. I can tell you this from experience. The worst thing to do is just Google reviews and log on to Forex forums blindly and make your decision based solely on the opinions of traders. Even if they purchased the robot. I can almost guarantee you you’ll get a positive and negative review even on robots that are profitable.
How can that be? Why would you give a negative review to a tool/system that made you money? The answer is simple. Many traders that tune into these forums have unrealistic expectations. Often times they are novice traders who have been beaten up by the Forex market. They’re losing traders because they did not have realistic expectations or disciplined approach to trading. So naturally, they opt to go automated, expecting a robot to achieve something they could not do themselves. Do not look at the Forex robot as the be all, end all. Look at it as an emotionless trader that you supervise, and you oversee. You’re the boss, not the other way around.
Now there’s nothing wrong with going the automated trading route as long as you’re fair to the robot and you don’t apply a different standard. The robot will make trades without emotion and fear. The robot will not have a bias of direction before making or exiting a trade. Many robots will manage a trade, which is one of the most difficult aspects of trading. The different standard comes in when you ignore that like humans, losses will occur. If you do your homework and really study the performance of a robot, then you’ll find the automated forex robots are well worth the time and money.
Do not rely on opinion alone, performance is what matters
Getting back to the forums as an example. I researched a robot I was interested in purchasing. 9 out of 10 traders trashed the robot and its owner. Comment after comment was negative, however, the back-test and forward test was quite the opposite. How could this be, did the robot just stop working? I decided to go against the negative reviews and just go by the stats. What happened? I ran the robot on a demo account and it got crushed. 50% of the account was gone in 2 weeks after a decent start. My gut feeling still went with the stats I was looking at which were over 2 years of live trading. So I let the robot run on a LIVE account, albeit rather small $1000. The robot, not only didn’t experience the 50% drawdown, but it has almost doubled that account.
The profits have more than doubled what I paid for. As far as I’m concerned, I can’t lose, because I’ve already taken the money out I used to purchase the robot, anything from here is the money the robot earned all by itself.
Test the Forex Robots with Demo Accounts, forward test live with very small micro accounts
Out of 5 robots I tested 2 were clear losers, 1 was near break even, the other 2 were clear winners. The 2 losers had one thing in common. They weren’t commercial/professional robots. They were cheap or free. The money management was almost nonexistent when I followed the trades. All the robot would do is enter and after that, it was at the mercy of the market after that. One of the robots had a martingale strategy. It performed great until that one trade that blew it to pieces. Stay away from anything martingale, especially if no stop losses are used. Are there good profitable free Forex robots? Maybe, but I personally will not put money on them unless I’m sure the money management is solid. I’d rather pay for something well coded because I know I’ll make back the investment and I’ll be able to profit long term.
The Forex Broker can make or break a Forex Robot
Trading spreads and execution of trades is the most obvious reason, but what you’ll often see is that the same EA’s you run on your demo accounts will not perform the same on a live account. This is particularly true if your trading strategy relies on tight spreads and fast execution. I’ll elaborate on this in a future post because this is really, really important, especially for new traders that rely so much on what a broker says, instead of the service that broker provides.
What you’ll almost always find is your Forex ea expert will have amazing results on a free Forex demo account, but soon as you go live, it can actually be a loser and you’re left scratching your head as to why. This is why you should at least have an idea of what’s under the hood so to speak. How does the robot trade? Does it make many short-term trades where the execution of the trade is pivotal? Scalper robots would fall under this category. Usually these types of mt4 EA’s need really fast execution with very tight spreads, otherwise over time, the spreads eat up the small, short-term profits. Some Forex brokers will work better for these types of automated mt4 ea’s than others. Very, small live test accounts will be how you’d find out, not demo accounts solely. I’ll discuss this further at some later point
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