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Forex Life

Can Forex EA Robots Trade Better Than Humans?

December 21, 2018
BY Emma Richards

From self-driving cars joining the big city taxi force to online assistants booking restaurant reservations, computer technology is proving itself time and time again in our everyday lives. So, it’s probably no surprise to you that powerful robots are now being widely used as auto trading robots in the forex market. But just what is a forex robot? How do forex robots evaluate market conditions, and are they really the best solution for people wishing to trade currency pairs and other similar assets?

Automated trading with a forex robot

Forex robots or expert advisors are getting more and more popular with part-time traders. This is because of the main benefit they offer… time. Top forex robots are now taking all of the work out of working from home, but there are some pros and cons to most forex robots. While they can multiply your daily trading volume a thousand times over, they are still fallible. After all, if trading robots worked 100% of the time, everyone would be profiting from the financial markets every single day and drinking cocktails by the pool. Let’s keep it real and uncover the pros and cons so you can make an informed decision as to whether you want a bot or not.

The financial market is all about balance. A ying yang of the money world. For someone to win, someone must also lose. Your goal as a trader is to become profitable and stay that way, and forex robots can help with that, but you can still lose money using a trading robot. Like many of us, robots can have a bad day too.

Who uses forex robots?

Not everyone has heard of forex robots, and so many people are still unaware of online trading in general. Incredibly, there are some people who do know about forex, but choose not to use trading robots. Some traders think of forex robots as nothing more than an ineffective automated trading tool for lazy traders. This is however a massive understatement.

In fact, most brokers are astonished to see that a large percentage of beginner traders are not using automated trading in the first year. Is this because they don’t work? Probably not. Forex robot creators report their performance quarterly, and a large number of them claim to have much higher profitability than the average first-year trader.

A Forex robot makes sense for people who don’t know how to make technical analysis and don’t have the time to monitor economic events. The use of trading robots is widespread in the financial world, and for big investing companies and hedge fund managers it is a superpower that sets them apart from home traders.

Traders nowadays are spoiled for choice. Exness traders can trade on any computer using the Exness WebTerminal, or they can get mobile with the Exness Trader app, but serious traders prefer to trade on PC. Trading on  a PC with the MetaTrader platform gives access to a full range of trading bots, so if you are thinking of automated trading, consider setting up a trading place at home. Exness provides MetaTrader and even a free VPS to shave milliseconds off trading response times and reliability. Milliseconds? Yes, milliseconds. Why is that so important?

Time is money

For someone starting out, milliseconds might not impact profitability so much, but for experienced traders who have expanded their trading budget significantly, every millisecond counts. One bank spent millions of dollars laying superfast fiber-cable to send trades between Chicago and New York, just to gain thirteen milliseconds. When it comes to trading, reaction time is very important. And when it comes to speed of execution, robots really shine.

Every one of the best forex robot creators insist that their trading robots can trade faster and better than humans. Forex robots are said to analyze real-time market conditions in microseconds, target the best forex trading opportunities, forecast the direction, and with fully automated efficiency, make the trade. It all sounds very convincing, right?

That’s because, for the most part, the best forex robots really can outperform the average human when it comes to forex trading. A human forex trader needs time to make technical analysis, then there are emotions and doubts as to whether the trading strategy will work. Minutes and even seconds of indecision can take precious points and pips out of a trader’s profit, which is why even Certain big banks use automated forex robots on currency pairs and other money-related assets. You might be thinking, well, that’s good for banks, but can expert advisor robots work for regular people? Would you feel comfortable giving access to your hard-earn cash to a forex robot?

The forex robot: the evolution of trading

To an expert advisor or forex robot, forex trading on the global markets is no more difficult than playing chess. And we all know how well robots can play chess. When Deep Blue beat kasparov in 1997, the rise of the machines took on a whole new life. Technical analysis shows that after the third move in a chess game, there are 121 million possible combinations. Deep Blue took them in its stride and amazed everyone.

When the world saw how quickly these next-gen robots could think, tech companies immediately considered the implications of adapting it to forex trading. That was over twenty years ago. The advances in robot intelligence have grown exponentially over the last two decades, and today’s expert advisors make Deep Blue look like a calculator.

There are many influences that push and pull trading asset prices, and for forex traders it can be a full-time job trying to find opportunities and make real-time decisions. A nation’s economy plays a major part, but political alliances, trade agreements, and bank announcements all play a part too–just to name a few. Forex trading is about trading currency pairs, so the amount of complication can be doubled since the aforementioned influences exist for both currencies and nations. It can be very time-consuming. A forex trader can spend all day looking for the right conditions to trade. A trading robot, however, can open and close dozens of trades every second.

Robot Forecasting

Unless you are a programmer, it’s perhaps difficult to comprehend how a trading robot works. One comparison that can help is how we forecast the weather. Yes, weather and forex have many similarities. The first thing you’ll need is data. Lots of data. You’ll need to compile metrics on temperature and sky conditions for every region on the planet and look for patterns. Let’s use a fictitious example.

it’s mid June. 35 degrees in Brazil with humidity and cloud cover. Three days later, South Africa has similar conditions. Theoretically, A South African garden grill party date can be tied to Brazilian weather. If Brazil consistently shows weather that later appears in South Africa, then we have a forecast. But, this might change if Florida has a hurricane. Solar activity will also affect the results. It’s getting complicated. So you built what is called a model. When X,Y, and Z = “this”, expect “that.” That’s an oversimplification of the weather, and it’s an oversimplification of forex too.  By the time you’ve crunched all the data, the favorable conditions might have already passed. Robots are very good at crunching numbers.

forex ea robot

A forex ea runs twenty-four hours per day and has unimaginable computing power.

Automated forex: robot trade forecasting trading

Forex robots cannot travel in time, but they can analyse multiple market movements and compare them to thousands of indicators and professional strategy-based conclusions. Best of all, they can do it in milliseconds… all day long.

Fully automated trading robots have a history of market conditions on digital record. A forex robot runs millions of computations every second, looking for patterns. Once it identifies certain repetitive conditions, it tracks what happens in the minutes, hours, and days that follow to see if the forecast holds true.

Forex robots also evaluate and adapt the threshold for when a forecast can be considered worthy of use. How many times must a pattern yield a usable forecast? It is far from being an exact science. Test a pattern too long and the trader won’t get to enjoy the benefit of the accuracy. Activate the forecast too soon and the pattern might not hold true. How many times should a pattern be tested? Three times? Ten Times? The robots create an average for this too, but the criteria is not fixed. Automated trading with a robot is not foolproof, and any forex broker or robot developer offering any kind of guarantee should be avoided.

Top Forex robots use trading indicators

Perhaps the most famous–and possibly the best–trading signal of all is the moving average. A moving average is an algorithmic calculation that creates a smooth rounded line running along the pointy spikes of a price line on a forex chart. So, whenever the price line of the currency pairs cross the moving average, it indicates a price reversal is coming and a trading opportunity in the making.

The best forex robots have this parameter and thousands more, all of them running simultaneously every second of the day. Now imagine you can run dozens of indicators on hundreds of trading pairs, all day long. What if all your active indicators suggest a coming price move for one particular asset? That’s one of the ways that forex robots identify opportunities.

Stop Loss and take profit

Both robot trading and manual trading safety is best achieved using two very powerful tools. Savvy traders set their investment limits based on the amount of free margin (available funds) on their account, not based on a hunch. A general recommendation is to use the Stop Loss tool, which automatically closes the trade if the markets go the wrong way.

Be sure you set the Take Profit limit to an acceptable level so you don’t miss out when the price reverses again. When using forex robots, the take profit and stop loss tools work the same for every asset, and will always follow your initial parameters without doubt, emotion, or exception.

Which forex robot forecasts the best?

Exness does not recommend a specific forex robot. The best forex robot of today might not be the best forex robot of tomorrow, and since we at Exness can’t predict how a forex robot update will affect its future performance, it’s impossible to point to one robot. Moreover, you might be reading this article weeks or even months after it was published. Whatever was hot at the time of publishing could have fallen to a faulty update.  

Remember when we spoke about weather? If you’ve ever relied on a news channel’s weather forecasts to plan your clothing choices or outdoor activities, you’ve probably left the home with an umbrella that wasn’t needed more than once. You’ve probably planned a trip in nature or taken a stroll around town and got caught in rain. Today’s weather forecasts struggle to make accurate predictions. This is because the models that have been built from the decades of available data are no longer matching our environmental conditions. Pollution and global warming have rendered most weather models useless. Fortunately, robots are on the job now.

The forex markets are also in a constant state of evolution. The data that a forex robot relies on to make real-time forecasts needs to be flexible to those changes. They need constant updates and recalculations. Simply put, if you wish to trade forex using a robot, you might need to change the robot you are using every few months, depending on the updates.

Forex trading forums are the best source for gaging the updates. People who trade are very helpful in keeping the trading community up-to-date. Forex traders don’t care about rights reserved. Register with trading blogs and Facebook groups. Those robots that get updated only to see a fall in profitability are outed quickly by the traders. Perhaps look for complaints. If a robot is doing well, traders tend to enjoy the benefits in silence. They get more vocal when a robot loses traction.

The Truth About Forex Robots

I’d love to provide you with statistics and show you that the best forex robots are better than traders doing it for themselves, but that wouldn’t be completely accurate and could be misleading. Some of the best robots post performance statistics claiming 85% to 92% success. That means that for every trade they make, they are right more than they are wrong. Sounds encouraging, but there’s something you need to understand. 

Forex robots are not artificial intelligence. They do not have a futuristic digital brain that can think. Whenever you see a forex robot promotion, they’ll talk about algorithms, but algorithms are just a fancy way of saying rules. Forex robots are nothing more than a tool to enhance, multiply, and speed up your trading. Yes, they are powerful, but the rules they follow are created by you.

You decide which assets are the best for you. You provide limits on your trading budget. And, you decide what levels of profit and loss you will accept. The robot uses its massive calculating power to find the best time to open and close orders based on the patterns of the assets you are interested in. Imagine cloning yourself one thousand times and then sitting back while your clones do the work. Again, it sounds great, and if the forex robot you are using has a consistently high level of performance, then you’re in good hands… but things can go wrong.

Forex robots use data from the past to forecast future prices, but if there is one thing every professional trader knows, it’s that past performance does not guarantee future results. As mentioned earlier, the models are constantly changing and evolving to incorporate new conclusions.

To simplify, When a market price goes from X to Y, then expect Z. But when Z doesn’t happen, the algorithm reevaluates and takes that conclusion off the list of possibilities. The outcome of Z would be a loss for any trader who has a robot running their trades.

Today’s market is perhaps more volatile than ever. COVID massively affected airlines, tech companies, shopping giants, cinemas, and hundreds of other industries, and even the best forex robots don’t have enough data to start forecasting tomorrow’s markets… yet. Automated trading may still outperform a newbie trader, but it has a lot to learn about 2020, and we at Exness predict that these environmental and market shifts are just the tip of the iceberg. 

Trading tip for trading with robots:

First get to know what forex trading really means before you turn to trading robots. You can get access to today’s most popular forex auto trader software from the Exness MT4 and MT5 platform. Robots can do all the hard work for you so you can just sit back and check your trading results , but many traders follow what the robots are doing. A trader can learn a lot by following what a robot is doing. It can be a very effective lesson in how to react to the markets. By monitoring the markets closely, you will be able to set more realistic parameters for your robot and keep in harmony with your personal goals.

You might choose to limit the assets that the forex robot looks at. Sticking to major currencies offers a more stable trading environment, but it also means your results will be less extreme both with winning and losing trade activities. It’s impossible to say which currencies are the best to trade. Robots don’t have a specific asset that performs better than another. Instead of focusing on which assets to trade, start with the amount you are willing to trade on a daily basis. 

Setting the forex robot to make very small trades can teach you a lot in a relatively short time. Setting a daily budget will help you avoid stress and not affect your lifestyle during the learning period. Once you know how much you are ready to invest, switch on the robot then keep your eye on what trades your forex robot is making. Try following one trading robot at the beginning. Using a demo account is perhaps the best forex introduction you could ask for. It’s a risk-free way to see how the size of investment correlates with the profitability of the robot.

Before committing to a forex robot, Exness recommends you get to know trading through practical experience before considering one of the free forex robots as your main trading strategy.

If you’d like to test your skills with a risk-free demo account, follow the steps below. You’ll get free access to some of the best forex ea robots in the industry. With flexible leverage and low deposits, you’ll also be able to open a real account and make real trades in no time.

 

Start expanding your financial options today.

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Disclaimer: the publication of analysis is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience or current financial situation. Analysis is not prepared in accordance with legal requirements promoting independent investment research and Exness is not subject to any prohibition on dealing before the release of analytics. Readers should consider the possibility that they might incur losses. Exness is not liable for any losses incurred due to the use of analysis. Risk warning: CFDs are leveraged products. Trading them carries a high level of risk, so it is not appropriate for all investors. The value of investments can both increase and decrease and an investor may lose all of their invested capital. Under no circumstances shall the Company have any liability to any person or entity for any loss or damage in whole or part caused by, resulting from or relating to any transactions in CFDs. © 2008—2019, Exness
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