The Role of Expert Advisors in Forex Trade
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December 9, 2016 at 10:44 am #4815
There are a lot of risks and stakes involved in conducting foreign exchange trading. Foremost of all, the forex market is an extremely volatile place. There exist huge risks of a trade running past the “stop loss” or “take profit” limits before a trader can actually generate a trading position. It might also be that a hasty or uncalculated move would result in the reversal of a profitable trend and would convert all the gains to losses. It is here that the secret lies – the secret to the popularity of those automated forex trading units which are frequently known as “expert advisors” or more colloquially as “robots”. What are these robots and what do they do? These are auto-trading units which are programmed in a way to identify ideal trading conditions and positive trends in the market as soon as such conditions and trends are formed. After that happens, the trade is executed accordingly. This assists them in reaping profits as soon as any position is taken. As a bonus, a considerably huge number of other trades are executed. Below, a few profits are mentioned which are obtained by trading with robots (Information Courtesy- CornerTrader):
• Usually, robots are found to not trade outside of the spread. This is their single biggest advantage. Owing to this, they do not run the risk of incurring losses. Also, a few pips are squeezed out for every hour of their trading time. As a result, quite a bit of profit is made.
• They assist the trader to endeavour for greater strategies and ways to discover situations in the future where a real risk could be undertaken which would be likely to result in profits.
• Frequently, a few traders get nervous while executing their first trade. Having robots trade on their behalf, is a process to get rid of the anxiety regarding running into losses.
• Information overload takes place where indicators, economic development-related news items and various types of macro and micro economic data etc. are concerned. All of these serve to intimidate the trader and overwhelm them to an extent. And then it becomes quite difficult for him/her to choose the ideal information and judge it patiently in order to execute a trade. Therefore, as a result of this mentality, a majority of traders play it safe and stick to a few choice pairs which are marked by them as”safe”. But this ‘playing it safe’ is non-existent in case of robots. Robots possess super-human abilities to process a huge amount of data and place multiple orders simultaneously; which is much more than a human is capable of. As has been mentioned before, they trade 24/7. Even though they are mostly limited to making small profits with every trade, the number of orders they place and the hours for which they trade, make them a roaring success in the market.
But there is still a cautioning to be done here. All said and done, it cannot be forgotten that robots or expert advisors have their own limits and can hence, never replace human beings. Thus, one cannot and should never really rely 100% on robots to proceed in the forex market. Because robots are, at the end of the day, machines with fixed ways of computing. They cannot make educated guesses or undertake risks where they are actually required. So, it’s advisable to make use of automated trading only in favourable situations.
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