Forex trading is evolving, just like any other trading. It comes with the internet and technology that make traders easier to buy and sell their stocks. One of the most advanced technologies in trading is the use of bot or artificial independence that will buy or sell stocks automatically. This automated trading software has many benefits and is easy to use, but which of the software is really suitable for your trading. Here is some information you have to gather before choosing for it.
Table of contents
- History of Automated Trading Software
- Benefits of Using Automated Trading Software
- Disadvantages of Using Automated Trading Software
- How to Choose The best Automated Software
History of Automated Trading Software
Forex Trading Software are also called Expert Advisors (EA). Expert Advisor is a software specially programmed to assist humans in taking over transactions in futures trading. All forms of trading transactions are allowed to use the Forex Trading Robot (EA), so it can be categorized as a Trading Assistant. Forex Trading Robots (EAs) have been developing for a long time, and were first created through a programming language called Metaquotes packaged in a metatrader.
Metaquotes was first created from version 1 in 1999, until now the latest metatrader version has reached version 5. In 2002, metatrader version 4 (MT4) began to be made, until 2005 MT4 was released. Of all metatraders, version 4 is the most widely used, because it is more complex than before. In version 5, metatrader programming languages have been given the advantage of being more focused on accelerating backtests and price detection in each Forex Trading Robot (EA).
Benefits of Using Automated Trading Software
The purpose of this algorithmic trading software itself is to make it easier for you to trade automatically or sometimes can be called auto pilot trading. So, basically, if you use this robot, a smart machine software that will do market analysis and trade open orders, everything is done by machine or robot. There are some benefits you can get from the use of automated trading software.
The first advantage of the first forex trading robot is multi-tasking. Forex trading robots are able to order hundreds until thousands of instructions per second to comb and execute every forex trading opportunity. This ability clearly exceeds what a human can do. However, for forex trading robots jobs is easy. But you need to know that not every forex trading robots have that super and powerful performance. The quality of the robot’s performance depends on the system that underlies its manufacture as well.
2. Unaffected by Emotions
The advantage of a forex trading robot is that it is not affected by emotions. Often people are very easily influenced by market conditions. In manual trading, traders are easily influenced by emotions when faced with volatile prices. Usually, they will shift stop loss and take profit positions because they feel greedy or feel worried about prices that do not move as expected. Of course, in the long term these bad habits can be an obstacle to a trader’s success.
However, it is different with trading algorithms or trading robots. Forex trading robots will only carry out instructions according to programming standards without emotional intervention in any market conditions.This means that the forex trading robot will execute orders such as buy or sell and place stop losses and take profits exactly as the program formulates. Therefore, it can be said that forex trading robots that are not affected by emotions are seen as superior to humans.
3. 24 hours or Non-Stop Working
Forex trading robots can work all day or non-stop as long as the forex trading robot is connected to a VPS. So, when a trading opportunity arises, the forex trading robot will always be ready to execute market orders at any time. In other words, if you use a forex trading robot for automated day trading then you don’t have to worry about missing trading opportunities even if you are busy with other activities or are resting outside the trading platforms.
4. Static Trading Performance
The performance of the forex trading robot can be measured clearly because this robot always consistently follows its programming standards. In general, its performance can be measured by backtest and forward testing methods. Therefore, before buying this robot, you should make sure that the performance report is good.
5. New Features Constantly Updated and Developed
Along with the development of the forex trading robot development process, more and more new features are also developing to keep up with market dynamics. Some of them are news filter features and invisible mode (to avoid brokers who stop loss – hunting). So that you can enjoy the most advanced features available, you need to find a forex trading robot developer that provides auto-updates. With these features, the trading robot will always be updated with the latest features.
Disadvantages of Using Automated Trading Software
Beside its benefits, there are also some disadvantages of using automated trading software. The disadvantages are not only from the trader’s factor itself but also from the outer factors such as the market. Here are some disadvantages you have to underline before using the software or how to keep using the programming language for trading.
1. Extra Cost You Have To Pay
Forex trading using robots is certainly a higher cost when compared to manual trading. In addition to spending money to buy the robot itself, you also have to pay VPS rental fees regularly, you know. It is undeniable that the better the quality, the higher the cost. Not to mention if you are not able to use the program by yourself, you need to find a person to watch your bot work. This also means extra cost you have to pay.
2. It Is Not For Every Market Conditions
When news with a large impact is released, usually opportunist traders will see any advantage of the volatility of price movements in market data to make a profit. This activity is called news trading and is usually carried out by scalpers. However, this activity carries a much higher risk when compared to trading in normal market conditions. If you are lucky then you can get a lot of profit. But if you are unlucky, the contents of your account can be sold out in an instant.
However, unfortunately forex trading robots are not made to be able to adapt to these situations. That’s because basically the trading robot’s way of thinking is designed in a linear fashion. It only works with what you have set before. If the situation doesn’t meet any condition you have set, the bot will be unable to work or make any order. Meanwhile, when the news is released, the movement is fluctuating and random.
3. Requires IT Skills to Manage
Oh yes this has been written before. Take a note that even if you use a robot, that doesn’t mean you don’t need any knowledge about trading. Precisely because the process in the forex trading robot runs fully automatic, then at certain times when market conditions are out of the ordinary, you are the first person to take control, you know. Therefore, it is recommended that you use a forex trading robot if you are already experienced enough in trading. In addition, you also need to have sharp intuition to know when market conditions are not conducive.
What you also need to know is that at least you have to understand the terms in IT and use software to be able to install and maintain forex trading robots. You need to learn this so that the forex trading robot can run according to the procedure and to keep the historical data.
4. Forex Trading Robots Is Not Allowed by All Brokers
This one is the weakness of the trading bot you have to underline. As mentioned above, forex trading robots can send tens to hundreds of market orders in a fairly short period of time. If many traders use forex trading robots, the broker’s server may be burdened by long lines of market orders. In this situation, the broker’s server may experience lag or freeze. Well, to avoid server lag and freezes, some brokers will prohibit the use of forex trading robots in certain account types or pairs.
How to Choose The best Automated Software
Automated Trading Software can be a good option if you have understood all the benefits and the disadvantages of using it. If it meets your market requirements with your automated systems, the last thing you have to do is choosing which best automated trading software to work with. But, there are things you have to underline whether there is bad, fake or dangerous software that is offered on the internet. Here are things you should check to find the best automated software trading to use.
1.Check the Software’s Result
The first way to indicate an automated trading software is good and has been tested for a long time is to ask for the software’s results. The bot that is not fake will usually post their robot results on myfxbook and fxblue. Look for a bot with promising results and one that has been tested for years.
2. The Trading Software Should Has Been Tested by Real Time Market
Second, the trading software must be tested by means of a forward test, for example by using live trade. What is that? Forward test is a way to test trading software in the real time market. It’s different from a back test or a strategy tester. If the back test is a bot test using simulation data or past data (no slippage, no requote, no gap, these things cannot be detected) so the results are not accurate.
If the results of this forward test are accurate because the robot is tested in the current live market conditions. So, robots also experience slippage, requotes, gaps etc. Especially if the robot is tested with forward tests for years. The better the robot. The point is to remember, don’t choose a backtest robot. Even though a robot has been tested for years, if it is tested with a backtest, it is better not to choose that robot.
3. Find How It Works
Do not choose a robot whose trading techniques are dangerous. For example, robots that use martingale and averaging trading techniques. Why are these two techniques dangerous? Because if the floating position is minus, the lot will continue to be added until the position is profitable. If the market reverses direction, it’s okay, if not, what about it? So basically, if you use the two trading techniques, the minus is big but the profit is small. It is not a good method to gain benefits.
4. It Has A Good Risk Management
A good risk management robot. Robot drawdown should not be more than 40%. If the robot drawdown is 50% then the robot is a bit risky. Drawdown is the loss experienced compared to the capital.
5. Make Sure The Account is Real
Make sure that the trading software uses a real account, not a demo account. Also be careful with robots that use Cent accounts. This account cent means to mark up the actual value. So, it’s as if you guys have big funds when in fact you don’t. Also be careful with robots that say they make big and consistent profits. That doesn’t make sense. Good robots usually have been tested for at least more than 1 year. And remember, it’s not tested with backtest, yes, but tested with forward test (Real Live Trade on Real Account).
6. Offered by Credible Broker
Choose a robot that works with a credible broker. The point is, choose a robot that uses a clear, regulated broker. The characteristics of a regulated broker are that it is not a bookie, does not accept funds from third parties, and what is certain is that a regulated broker is a broker that is well known and has a name. As a tip to check if the broker is credible, famous or not is to check whether the brokerage company is often covered by mainstream media such as Bloomberg, CNBC, Reuters etc.
After knowing the advantages and disadvantages of an auto trading robot, now you can consider whether you want to use a forex trading robot or not. By looking at all the advantages found in forex trading software, there are also disadvantages that you need to pay attention to. Especially to create such stable trading strategies for your trading platform.