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 give the trader a ‘set and forget’ trading system, where the trader installs a Forex robot onto their trading platform, selects their parameters and the robot takes over. ..well that’s what is supposed to happen.

Many are wishing for this Holy Grail, and though there are some very interesting Forex robots out there, thorough testing by experienced traders has shown up many failures in the claims made by the sellers.

Most of the Forex robot performances 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 access, these will and do vary wildly. We have never yet been able to duplicate the results claimed on a sales page. Some Forex robots we have tested were remarkably good at cleaning out our demo account, so approach very carefully.

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 when you stop and think about it, if a Forex robot cleans you out on a demo account, how do you think it will go live???

I would love to, but, I am not going to give you the Forex Robot failures, why? quite 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 these signals. It opens a trade automatically, based on risk management parameters and attempts 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 require narrow trading spreads, often 2-3 pips, occasionally up to 5 pips. It is not unusual for a robot to “bed down” before they start trading. Some Scalp, which is taking small quick trades and others trade over longer periods and all will have loosing trades. You just have to make sure the robot has stop loss strategies built in, some don’t, so check carefully!!

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 turns and comes back into profit. If the draw-down is huge it can also crash your account since you may not have the money in your account to secure the loss, so your broker will close your account.

If you don’t want to day trade and want to use automated Forex trading, there are a couple of Forex robots we use, these two robots are regularly updated by their developers, so we are always checking 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.