Forex Automated Trading Robots Explained
Forex, the market where currency pairs are bought and sold, is the most liquid market in the world. Traders who aim to benefit from favorable exchange rate movements, trade round the clock, since it operates 24 hours a day, five days a week. For the purpose of ensuring profitable forex trades, one needs to be able to interpret the leading and lagging indicators.
Since interpreting signals is not a particularly easy task, especially since the indicators tend to produce conflicting results, forex signal systems, both manual and automated, caught on in a big way. Automated forex signal systems that did not require the presence of the trader to execute trades, took precedence over mechanical systems since the latter required the trader to be present for the purpose of buying and selling based on the signals received, and thus was not totally effective in removing the human element.
Automated systems are also known as forex automatic trading robots, are based on computer programs. These programs determine the currency pair that should be bought or sold at a given point in time by generating standard trading signals. A day trader, who uses the 5 min or 15 min chart for judging the direction of the market, may use these robots to make profitable trades.
How are they Designed ?
Forex robot systems are designed by professional forex money managers, who use past performance and trends to simulate results that may reflect the actual trading environment. They are based on hindsight which, as we all know, is 20/20. An account may not achieve profits similar to those shown, since past performance is not indicative of future results.
Criteria to Determine the Best Robots
The performance is based on the characteristics of the software. The system should be capable of the following things in order to give optimum performance and be accepted as the best automatic trading robot.
Fully Automatic: The forex robot system should be fully automatic in order to be successful in eliminating the human element and ensuring round the clock trades without any supervision. It should eliminate the need for brokers who were previously required to manage accounts.
Low Account Investment: People should be able to trade with a low initial trading account since robots cannot always eliminate losses because of the very way in which they are designed.
Back Testing Should Yield Results: This is important since simulations are based on hindsight and past performance.
Inbuilt Loss Protection: It should have an inbuilt loss protection mechanism in order to ensure that people using this system do not incur huge losses because of wrong signals.
Constant Monitoring: The performance of this system should be constantly monitored by experts in order to improve and optimize trades.
The automated trading software should be of use to traders, who are not comfortable trading on their own but still want to manage their own accounts. Institutional investors who want to invest across asset classes, in order to reap the benefits of diversification, should find it useful. Brokers should be able to offer these systems as an additional service to their customers.
