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If you've ever traded, chances are you already know something about Forex trading robots. An expert advisor or Forex trading robot is an algorithm, a software program that automatically carries out trades for you. If chosen well, a robot can help you make a lot of money in the foreign exchange market, but it also comes with risks. That is why it is important to get all the information possible about these trading robots before starting to use them. This is the purpose of this guide. I will start by explaining what a Forex trading robot is, what risks are involved in using it and how to choose the best robot. We will also review the top 6 candidates for the best Forex trading robot.
What is Forex and Forex trading?
Forex, also known as currency trading or FX, is a trading profession that involves the simultaneous buying and selling of several currencies on the global market. Forex traders, by exchanging one currency for another, aim to make a profit in this actively traded market.
The Forex market is recognized as the largest and most liquid financial market in the world, with a daily trading volume of nearly $ 5.000 trillion. Therefore, the number of people who engage in Forex trading is increasing day by day. For this reason, some companies have started developing a forex robot to help traders in their forex trading. We will discuss these robots in detail in the following article.
What are forex trading bots and trading robots in the foreign exchange market?
Forex trading robots, also known as Forex bots, are automated software that generate trading signals similar to other trading bots. Using the MQL scripting language, most of these bots are designed to work with MetaTrader, allowing traders to provide trading signals or position orders and manage their trades.
As we said, these bots can be really profitable and profitable for Forex traders, which is why they are so popular with traders. In fact, the vast majority of traders, especially seasoned professionals, use these robots for their trades. Here are some of the benefits of using trading robots or expert advisors:
They can be used by both experienced and novice traders.
- They analyze historical data quickly and accurately
- They don't act impulsively or emotionally.
- They look for tradable currency pairs and offer them to traders.
- They allow trading 24/24.
- They can implement different negotiation strategies
- They can be combined with a Forex VPS to maximize performance.
In addition to the advantages mentioned, some Forex trading robots, especially those recently developed, present risks for traders. It is essential to pay attention to these types of threats when choosing your Forex trading robot.
What are the risks of trading with a forex robot?
Trading on the foreign exchange market is a high-risk, high-yielding type of investment. However, it can be risky for inexperienced traders. There are some risks associated with trading with a forex robot.
Underperforming algorithms
Perhaps the number one risk that every trader takes with a forex robot is that of weak algorithms. All forex trading robots are essentially algorithms, pieces of code created by programmers. As with any software, there are no fixed quality standards. Just as a million dollar budget AAA game and a buggy mobile game are both games, there are many Forex trading robots that have only the name in common. This is why it is important to know which Forex robot to choose to trade for you.
Flash crashes
Even Forex trading robots with good algorithms can, in some cases, result in massive losses for the Forex robot trader. If you forget to set automatic loss limits and configure the Forex robot accordingly, it can malfunction and start trading all the money in seconds or minutes. This is where the name Flash Crash comes from. The first time this happened, in 2010, Wall Street had to declare the trading of the day invalid because, within two minutes, the value of almost all the stocks had dropped to zero. In a highly liquid and volatile market like Forex, a flash crash is more than a risk, it is almost a certainty, and even more so for those who rely exclusively on Forex trading robots.
Truffle
This is the case with some Forex robot developers who appear overnight to sell their trading systems with a money back guarantee and disappear a few weeks later.
Long-term inefficiency
Another criticism of forex trading robots is that they provide short-term gains, but their long-term performance is mixed. This is largely due to the fact that they are automated to move and follow patterns within a specific range. Therefore, in the long run, a sudden price movement will nullify the profits made.
