A forex robot is forex trading software that automates trading decisions. The most popular robots for retail traders are built around the MetaTrader platform. These robots run on MetaTrader as "expert advisors," and they can do just about anything, from giving you a signal to place a trade, to placing and managing the trade for you automatically.
Key Takeaways
- A forex "robot" is trading software that makes trading decisions for you, more or less acting as an advisor, but robots have their pros and cons.
- Your robot can be programmed to trade for you all day, every day, although you might want a hand in what it decides on your behalf.
- Some forex robots rely heavily on backtests in a process known as “data mining.” They base their moves on this approach.
- Not all forex robot manufacturers are reputable or reliable, so be sure to do your homework first before jumping in and allowing one to take over.
Pros and Cons
If you have a forex strategy that's strictly mechanical and doesn't require a human in the decision-making process, you can program your forex robot to trade for you 24 hours a day.
Many companies create and sell forex robots, but be careful whom you deal with if you're in the market to buy one. It's not uncommon for a company to spring up overnight and start selling an "instant riches" forex robot, including a money-back guarantee, only to disappear in about 45 days or so.
The majority of made-for-purchase forex robots are not profitable, so do your research first if you'replanning on purchasing one. It's best to be wary, because there's a great deal of curve-fitting or data-mining bias in the made-for-purchase offerings.
Data-Mining Bias
Data-mining bias is the unspoken enemy of many traders who purchase forex robots. It refers to the process of "cherry-picking" the best backtest out of hundreds or more, and presenting that backtest as the likely outcome for the purchaser of the forex robot.
David Aronson is one of the leaders of the fight to make investors aware of data-mining bias. Aronson has written an excellent and detailed book titled"Evidence-Based Technical Analysis." Among many other good arguments, he asserts that the systems or indicators that are said to be the best performers or most accurate predictors of future performance are likely false conclusions. The finding of the outlier is often proved by looking at one data set and not testing that indicator over multiple cycles or the environment.
Successful Robots
There are some successful robots out there, but be aware of the data-mining bias that is front and center of most made-for-purchase systems. Typically, these systems maintain an edge and manage risk successfully. They're less about high win rates and more about position sizing and cutting losses quickly.
If there was ever a good example of "buyer beware," this is it. The phrase is extremely applicable to forex robots. When you're thinking about buying a system, ask yourself, "If it works so well, why is it being sold at such a discount?" Altruism is typically not the intention. Subpar systems are often sold as soon as a data-mined outcome can be put together so an uneducated buyer can purchase the code.
Frequently Asked Questions (FAQs)
How much does a forex robot cost?
The cost of forex trading robots varies significantly, but keep in mind that cheap services might be cheap for a reason. If a service costs less than $100 or so, then you should take extra precautions to research the service and ensure that it is actually a better deal than more expensive services.
How do you create a forex trading robot?
To create a forex trading robot, you'll need a brokerage that gives you access to the trading software's application programming interface (API). Not all brokerages offer access. Once you can access the API and program your trading robot, you need to come up with a strategy. That means identifying profitable trading signals and backtesting them to ensure they're consistent. After that, you just need to put the pieces together and tell the trading API what to do when those trading signals are triggered.
FAQs
The short answer is: it depends. There is no guarantee that any forex trading robot will work, and there are many factors that can affect the performance of a robot. However, there are some robots that have been shown to be profitable over the long term.
How profitable are forex trading bots? ›
Another criticism of forex trading robots is that they generate profits over the short term but their performance over the long term is mixed. This is primarily because they are automated to move within a certain range and follow trends. As a result, a sudden price movement can wipe out profits made in the short term.
Is it safe to trade with a robot? ›
Although appealing for a variety of reasons, automated trading systems should not be considered a substitute for carefully executed trading. Technology failures can happen, and as such, these systems do require monitoring.
Can you make money with a trading robot? ›
Trading bots have the potential to generate profits for traders by automating the trading process and capitalizing on market opportunities. However, their effectiveness depends on various factors, including market conditions, strategy effectiveness, risk management, and technology infrastructure.
What is the success rate of bots in forex? ›
In trading, success rates of 50-60% for long-term trading systems and 70-80% for intraday trading systems are considered to be good values. However, some Forex trading robots on the market claim a success rate of 95% or even higher, in which case you should be wary, because: it could be a marketing gimmick.
Do forex robots make losses? ›
No, an auto-trader EA (Expert Advisor) or robot cannot guarantee profits in Forex trading without any losses. Trading in the foreign exchange market involves inherent risks, and there are several reasons why no system, including automated ones, can provide a foolproof guarantee: 1.
Has anyone made a successful trading bot? ›
It depends on the bot! Some lower-risk crypto trading bots boast a 99% success rate, while others execute higher-risk strategies and have a lower success rate. The main thing most investors need to consider is whether the bot they're looking at can execute their specific investment strategy successfully.
What is the most successful forex bot? ›
Top 10 Best Forex Trading Robots: Check the List
- MetaTrader 4 (MT4) Listed as the most popular trading platform, MetaTrader 4 is widely popular. ...
- MetaTrader 5 (MT5) ...
- WallStreet Forex Robot 2.0 Evolution. ...
- Forex Flex EA. ...
- Forex Diamond EA. ...
- FXStabilizer EA. ...
- Forex Fury. ...
- Forex Gold Investor.
The Hedge Forex Robot is a fully automated robot software for forex trading that trades based on a hedging strategy (this means buying and selling at the same time) paired with trend analysis. This bot is appropriate for both beginners and advanced traders, due to its simplicity in use and set-up.
Can you live off trading bots? ›
Making a living only through trading bots is obviously not easy, but it's not impossible either. While automated trading systems have helped some investors and traders earn money, it's far from easy to profit in the stock market due to the volatility of prices and market emotion.
Free trading bots are one way that scammers lure in their victims, as are “guaranteed” returns. In reality, no trading platform can offer this. Any such offer is disingenuous at best and a scam at worst. Trading bot scams also rely on the growth of their markets for a supply of new victims.
Do banks use trading bots? ›
2.1. 1 Market Making: Banks use trading bots to facilitate market making, providing liquidity by continuously quoting buy and sell prices for various financial instruments.
Are forex robots worth it? ›
Some forex robots can work and be effective trading tools but very rarely, but not all of them are reliable or trustworthy. It is important to do thorough research and due diligence before investing in a forex robot to ensure that it is a legitimate and effective trading tool.
How much is a forex trading robot? ›
The cost shifts from one method to another. The 1000pip Climber System, for instance, has a one-time introductory cost of $97, while the GPS Forex Robot costs $149. For a set fee each month or year, other systems provide access to a wider range of features.
Can trading bots really profit? ›
Crypto trading bots are profitable. However, it's not as simple as it sounds. You need a deeper understanding of how these tools work. You also need to be equipped with the knowledge to decide whether they are the missing piece in your crypto trading puzzle.
Are trading bots worth using? ›
Crypto trading bots can be an excellent tool for experienced traders looking to execute automated trading strategies. However, they are not plug-and-play money-making machines. To successfully trade using a bot, you will have to have it execute a trading strategy that you have thoroughly backtested.
Is robo trading profitable? ›
Robots can be beneficial for trading as they execute trades based on predefined rules without emotional biases. They operate quickly, handle complex data, and can run continuously. However, success depends on the effectiveness of the strategy, proper risk management, and adaptability to changing market conditions.
Does automated forex trading work? ›
Automated forex trading offers numerous benefits, including reduced emotional bias, 24/5 market coverage, and backtesting capabilities. However, traders must carefully consider factors such as strategy effectiveness, data quality, and realistic expectations before trying automated trading.
How much does a robot cost on forex? ›
The Cost of a Forex Robot
The cost shifts from one method to another. The 1000pip Climber System, for instance, has a one-time introductory cost of $97, while the GPS Forex Robot costs $149. For a set fee each month or year, other systems provide access to a wider range of features.
