When people first start trading, many look for the best way to make a good profit as quickly as possible from their home forex business. There is nothing wrong with that, in fact it is the primary reason for going into business. One of the tools that is often marketed at traders are Forex Robots, also known as Expert Analysts or simply EAs.
First of all what are Forex Robots?
Well, for those with an active imagination, please dispel any image of a robot calmly telling you when to enter a trade or flaying its arms in the air as it shouts out "warning, warning exit a trade." The large financial institutions have spent millions on developing software solutions to aid their professional traders. Luckily for us, we can buy them for a few hundred dollars directly off the internet. And no, I do not mean the same ones that cost millions for the banks!
Why use forex robots?
Well it seems that for the new trader, a lot of the marketing suggests that Forex Robots (or EAs) are just what they need. They list some of the benefits to a trader:
They do not need to spend time trying to understand the technical side of trading
They do not need to spend hours looking at charts in order to identify trades
They do not need to have any knowledge of forex trading
And by eliminating the "human" component risks are reduced as the robots do not experience any of the emotions that we do.
There are many EAs being marketed. How is the trader to decide on which one to choose? In order to entice the new trader, internet marketers often provide testimonies of how their accounts have grown over a given period e.g. one, three or six months. Also claims are made on how a given EA has been able to be successful over a period of "back testing." Back testing is the process by which actual historical data is used to prove the validity of the software.
Another reason that forex robots appear to be so attractive is that they are promoted as allowing a trader to develop his forex skills and his own trading strategy whilst making money at the same time.
I do not doubt that there are people who have made money from using these tools.
So by the sounds of it, these Expert Advisers must be the "golden goose" of forex trading.
I personally, however, have a few words of caution for anyone thinking of using an EA.
Firstly, I have reservations about any piece of software that claims to be able to consistently place trades winning in the long-term. The markets are simply changing too much. All too often I have heard about people who have used Forex Robots and have had substantial loses.
Most of the Forex Robots limit themselves to a limited number of currency pairs. I personally have a core of six currency pairs that I use, although the skills that I have learnt I also use successfully on other currency pairs as well as indices. Just to make it interesting, one of the strategies can be used on commodities as well!
This leads onto another key point. In my trading, I have a core strategy which covers maybe 75% of my trades. However, I also have a strategy for trading in the medium and long-term. This ensures that I am generating income in a number of different ways. Forex robots do not have this flexibility.
One of the constants in the financial markets is change. One of the drawbacks of the majority of software is that it is unable to operate to the same level of success in differing conditions. A human can adapt.
There are other points I could make. However, my personal viewpoint would be not to spend money on EAs. Instead invest in a good education, develop the correct mind-set and attitude to succeed, acquire the understanding of how the markets work, of technical analysis and apply them to the trading strategy. The best expert advisor as far as I am concerned is man himself.
With the basics mastered you will be able to adapt your strategies in line with market conditions and make significant profits where no robot can. By investing in ones future I am convinced that a trader will find themselves in a very strong position to be highly successful.
Kaz Kowalski has been providing specialist project management support on a number of high profile projects in blue chip companies across a variety of industries including Banking, Information Technology and Telecommunications. This experience has proven valuable in evaluating various marketed income streams. He strongly believes that running a Home Forex Business is the most satisfying and profitable means of achieving financial freedom. His passion for forex trading drives him to let as many people as possible be aware of the enormous achievable potential of running a home forex business.
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