There’s no denying that technology has started to revolutionize how things work today. We’ve been seeing its relevance in the Financial Market, including the emerging AI or robot traders.
Robot traders or Expert Advisors (EA) allow you to enter the market with minimal effort – buy their robot, and it trades on your behalf. However, forex robots may bring you tons of risks you’d never think of.
Lesson Highlights
- Trading robots or expert advisors are software that allows traders to participate in the forex market without doing anything.
- The primary criticism of trading robots is their inability to place trades based on market fundamentals.
What Is a Forex Trading Robot
When you hire a forex trading robot, you have technology on your side.
Trading robots are trading software that allows you to enter the market without doing anything. They automatically do it for you, mostly based on historical market data and back testing.
Advantages of Forex Trading Robot
Trading robots have several quirks and advantages that would benefit you if you’re in the market for one. Here are the things you can expect when you buy a trading robot.
Passive income
A trading robot may be the best option when a beginner investor or trader doesn’t want to experience the learning curve.
A trading robot trades for you, so you won’t have to study how to trade and master the market. This way, you can do your everyday tasks while your robot trades your investment and, hopefully, profit from the market for you.
Data-driven decision
Trading robot software takes advantage of algorithmic market data. With a robot, you ensure that your trades are executed based on the historical and optimal price points for profit opportunities.
Automated trading
If you’re always on the go but want to capitalize on the potential of the financial market, the automated trading function of all trading robots may benefit you.
Trading robots generate and analyze signals, place orders, and manage trades on your behalf.
Removed emotional strains
Forex robots are best utilized to remove the paralyzing effect of emotional strains in trading. These robots’ decision-making is mainly based on pre-defined strategies and market data.
Risks of Forex Robots
1. Expensive
Developing an intelligent robot requires significant research, development, and programming investment. Skilled developers and programmers must design and implement complex algorithms, backtest the robot using historical data, and refine its performance over time.
These development costs contribute to the overall price of the trading robot.
While some forex companies offer robots below $20, the most profitable ones cost a heft amount of money, up to $10,000.
Remember, less expensive trading robots may lack features that give you profitable opportunities. You can also expect cheaper robots to be less smart, making market data analysis slightly inferior.
2. Inability to trade the news
The main vulnerability trading robots have is their inability to adapt to the ever-changing nature of the market.
The market is dynamic; it changes all the time. The problem is that forex robots are not programmed to trade the news and adapt to the dynamic conditions of the financial market.
As a result, significant losses may occur if not closely watched or managed. This can be counterproductive, especially if you bought a trading robot for convenience.
Now, the scam here is not the trading robot itself but how the company markets it.
They sell these robots with the promises of convenience, consistency, and high returns, which is mostly unusual given the market dynamic.
In the next lesson, you’ll learn what is trading signal is and how scammers market such tools to deceive traders.
