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Posted on May 20, 2022 at 03:30 PM
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Forex Trading Bots: How Safe Are They?

No doubt, Forex Trading Bots, a.k.a. Expert Advisors or robots as they are fondly called, are highly functional. They are the "Tesla" of the Forex trading world and have totally transformed the concept of Forex trading.

Because the world is evolving so quickly, things that were once "vision 2020" are now considered commonplace.

Smart houses, smartphones, self-driving cars, etc., are typical examples of how automation is taking over our life.

The Forex trading realm is also not left out, as robots have now become the holy grail of automation.

They are now the "go-to" for every busy Forex trader wanting to juggle their various responsibilities and jobs with the many attractive opportunities in the money market.

Before we delve into the characteristics of Forex Trading Bots, let's take a quick detour to the basics.

WHAT IS A FOREX TRADING BOT, EXACTLY?

Forex Trading Bots, often known as robots or expert advisors, are fully automated software programs that work in conjunction with Forex brokers. They utilize algorithms that recognise patterns, generate signals, and act on them automatically.

In other words, they operate continually with the push of a button, executing trades based on mathematical formulas applied to a prior price history.

With these preprogrammed formulas or algorithms, they are able to detect entries and exits in the Forex market, produce trading signals, and execute BUY or SELL trades.

According to Investopedia, the MQL is the programming language used to build and integrate most Forex Trading Robots with the MetaTrader application.

With the help of the MQL program, traders are able to automatically generate trading signals, place orders, and manage trades at a go - with just the click of a button.

That being established, it's time to examine some of the characteristics of Forex trading bots.

SOME IMPORTANT FACTS ABOUT FOREX TRADING ROBOTS

  1. They Don't Think for Themselves: Forex Bots are like computers. They are built to follow instructions 'unemotionally' and without hesitation.

    They are essentially 'Garbage-In-Garbage-Out' and rely entirely on the prowess of the trader programming them.
  1. They are Great at Technical Analysis: In technical analysis, we basically deploy strategies to help predict future price movements of financial items, based on the price patterns and movements in the past.

    Since robots are computers with excellent memories that are unaffected by fatigue or emotions, they are well-fitted for this assignment and deliver perfectly. They provide precise, perfect and accurate technical analysis in the shortest possible time.

    However, the same cannot be said for fundamental analysis.

    Fundamental analysis involves the study of numerous external factors such as political and industrial events, to help anticipate the future behaviour of the Forex Market.

    Hence, it takes a true human to stay on top of these external factors and the different ways they can affect the markets, especially when unexpected occurrences occur (e.g., wars). 
  1. Robots Are Not 100% Perfect: There are lots of Forex trading bots in the market and with the broad presence of online scams and fraud, it's important to go for only those that have been tested and trusted by seasoned Forex traders over the years.

    Others may not be scams but just poorly developed or infected with flaws, causing them to execute incorrect trading instructions and resulting in significant losses for traders. 

SOME PARTING WORDS

In the end, it is important to note that every Forex trading bot is operated by a human, and this human aspect cannot be overlooked.

While robots are completely automated beings, the responsibility of correctly programming them to function rightly still lies in human capability.  

It is also worthy of notice that the use of Forex trading bots is divided into two 'schools of thought'. 

The first group believes that Forex trading bots are the future, and are sufficient to trade the markets.  

The second group, on the other hand, maintains that manual observation of the charts and fundamental analysis of the Forex market is the way to go.

It doesn't matter which school of thought you belong to, our end goal at InstaFxNg is to have you make as much profits in your trades as you desire. 

These are just a few of the key issues we'll cover in this episode on Forex trading bots. More attention will be directed to the concept in a future article.

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