What if you could deposit some money, sit back, and let an automatic Forex trading system make you rich? Sounds too good to be true, right?
Automated trading systems are particularly popular with beginner Forex traders. They do exactly what you’d think they’d do: perform trades using computer automation. The makers of these programs promise users big profits with virtually no effort on their part.
The goal is to make easy money without having to do any of the manual work yourself.
It is still possible to make money using an automated system, but these systems aren’t “set it and forget it.”
How Do Automated Trading Systems Work?
An automated trading system allows you to create a set of rules for trade entry and exit, and a computer “robot,” also known as an “expert adviser,” will carry out trades on your behalf based on your rules.
The entry and exit rules can be as complex or as simple as you want them to be, depending on the specific platform you’re using.
Most automated systems require you to use software that’s connected to a direct access broker.
Some systems have “wizards” that help users choose a strategy based on common technical indicators to set rules for automatic trades. But successful traders will create their own strategies, which requires a little extra work on their part.
Once all of the rules are established, the system monitors the markets to find opportunities to buy or sell based on these rules.
Why Automated Trading Can Still Make You Money
Automated Forex trading is still making a lot of people money. These systems are tools, and just like any other tool, they need to be used properly in order to generate the desired results.
One of the main reasons why many traders argue that automated systems can still make you money is because they take the emotion out of trading.
If you have any experience with trading, you know that emotions can cause you to fall off track and deviate from the plan. Automated systems help prevent this from happening. Trades are only executed when the trade rules have been met, which eliminates the possibility of questioning or hesitation when making a trade.
In a similar way, automated trades help traders stay disciplined – even when the Forex market is volatile. Fear of a loss or the desire to profit off of a trade can make it difficult to stick to the plan. Automated trades ensure that the trading plan is followed exactly.
Automated systems also respond to market conditions immediately, which means orders can be generated as soon as the criteria is met. Getting in or out of trades a few seconds early can make a world of difference in the outcome. The Forex market can move very quickly, which can be frustrating if a trade moves past the stop loss threshold or reaches the profit target before an order is even entered.
There’s No Such Thing as Easy Money
While automated systems have plenty of advantages, there are some drawbacks, too. And there’s no such thing as easy money – even when you’re using an expert adviser.
There is a bit of a learning curve when using these systems, which means there is a greater risk of you losing money. It’s recommended that you start with a small trade size for this reason. Mechanical issues can and do happen with these programs. You lose Internet connection, or there may be issues with the component that turns theoretical trades into actual trades.
Automated systems aren’t “set it and forget it” either – they do require monitoring. There are stories of traders experiencing issues with erroneous orders or duplicate orders. Sometimes orders are missed. If you’re not actively monitoring the program, you may miss these events.
The bottom line is this: an automated Forex trading system can still make you money, but you need to know how to use the tool properly to get the results you want. There is no easy way to make money, but the time and effort you put into developing your strategies will allow you to take advantage of opportunities immediately using your “robot” trader.