Algorithmic automated trading

 

Forex autotrading is a slang term for automated trading on the foreign exchange market, where trades are executed by a trading software, called Forex Robot, which is based on a specific trading strategy.

The trading strategies consist of a set of mathematical and/or statistic rules, applied to the changes in price and volume of currency pairs, but also of stocks and other financial assets or derivatives, and are mostly based on technical analysis.

In few words, Forex robots are automated systems that enter trade orders on behalf of the trader.

The set of rules don’t change, are generally not revised by the creator, or not so often anyway, and most importantly they do not adapt to the changing conditions of the price behavior of the asset.

Once the set of rules are determined, Forex robots are tested on historical data, through the so-called back testing, in order to both evaluate the current performance and to improve and optimize the set of rules for a better performance and results.

The process is automated in the various steps of the trading: not only in the entry order but also in placing profit taking and stop losses orders, considering also the target of minimizing the maximum drawdown and in respect of money management rules.

There are also robots which, instead of using algorithms and mathematical rules, look at the past performance of given currency pairs and, going over its short and long-term price evolution, look for cyclical trends that have occurred during the currency pairs trading lifetime. Based on the knowledge of cyclical trends, the trading robot identifies uptrend, downtrends, entry and exit points, and executes the trades.

In addition to the Forex Robot intended to be a fully automated trading software executing orders based on certain algorithms on behalf of the trader (who usually can only interfere by tweaking the technical parameters such as lot size, risk parameters, stop-losses and take profit principles between predetermined choices, there is another kind of trading software which is intended to be a “signals generator”.

In such a case, the trader receives the input on what to do from the trading software (entry point and exit point) and needs to manually execute orders. Also this second type of robot is based on mathematical and statistics rules and algorithms, the main difference being that this trading software is not fully automated as opposed to the robot which is full automated.

 

 

Advantages and disadvantages of Forex robots

An automated system is unaffected by the psychological swings of the human traders. In most cases, the failure in Forex, Futures, Stocks or other financial asset trading is due to lack of discipline which is caused by the incapacity of the human trader to master his/her psychology and behavior.

For this reason, having a tool which guarantees discipline is probably the most important advantage of the Forex Robots.

An automated trading software can generate more trades than a human trader can handle and can replicate its actions across multiple markets, currency pairs and time frames.

On the negative side, robots, despite their advanced abilities, are not intelligent machines, can not think independently, can not imagine new situations and think creatively, but al they do is to carry out instructions based on algorithms and mathematical and statistical rules.

Nevertheless, there are events outside of the robot’s reality which can change completely the market conditions and thus damage the performance of the forex robot.

 

 

How to avoid scams

Talking about fully automated trading robots which potentially appeal to a huge number of traders (trading robots allow everybody to invest, including people who are normally busy in their own job during market hours and who could not trade otherwise), the risk of scams is quite high.

So how does Forex Robots in Black make sure to promote forex robots and trading software whose results and performance are truthful and are not scams?

The answer is quite simple: we promote only those trading software which is verified by independent third parties with respect to results and performance, namely:

 

  • MyFxBook
  • FxBlue
  • MT4Live
  • Forexverified

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