Are Forex Trading Bots Profitable?

forex trading bots

There’s no denying that the Global Forex or foreign exchange market is one of the most heavily traded markets of the world, with an estimated $5.1 trillion worth of Forex being traded daily. In Layman’s terms, Forex trading refers to the process of exchanging one fiat currency for another, usually for reasons ranging from commerce, money transfers to trading. 

As a result, scores of forex traders have been successful over the years, which have, in turn, triggered an influx of novice forex traders into the market.  However, being successful in forex trading depends on a variety of factors including knowledge, technical know-how, experience, and timing. 

Automated Forex Robots

To help such novice traders and others to increase their profitability when trading in Forex, a class of software known as Forex trading robots have been developed by numerous developers. They refer to a computer program that allows users to determine whether to buy or sell a particular currency pair at any given point. They base these decisions on a set of forex trading signals, that are designed to remove the hindrance caused by emotionally driven trading decisions, something quite common in manual trading. 

Advantages of Automated Forex Trading over Manual Trading

Expert traders possess the required experience and technical know-how to use manual trading in a profitable way. Despite its many limitations, manual trading still has some redeeming qualities. The most obvious good quality of manual trading is its non-susceptibility to large unpredictable events such as various macro-economic events and other major shifts in economic trends and climates. Despite this, when compared to automated forex trading using a forex robot, forex robots offer a wide range of benefits, especially to novice traders in the market. 

As mentioned before, automated trading using Forex robots can automatically overcome all the issues associated with manual trading. The basic characteristics are summarized in the points below. 

  1. Forex robots operate on a 24/7 basis, executing trades instantaneously when certain predefined conditions are met, and the profit opportunity is calculated. 
  2. Forex robots tend to take objective and uniform decisions as they are not susceptible to human intuition or emotions. 
  3. Forex Robots can also scan an enormous amount of information after computing the vast number of variables in the market. This allows them to process the information in either large or infinitely small timeframes, depending on the requirements of the trader. 
  4. Forex robots allow users to recognize trading opportunities and act instantaneously, which results in a higher level of profitability. 

How to Measure the Effectiveness of Robots 

Forex Robots have proven beneficial for many novice traders over the years, but not all of them are legitimate. There are many federal governments across many nations that have outlawed forex trading robots and similar software applications. 

However, to be absolutely sure whether the selected forex robot is profitable and not illegitimate in any way, a bit of market research would help. There are various authoritative sites, offering reviews and client testimonials for all the known forex robots available in the market. Third-party client testimonials can shed insights into a forex robot’s qualities, legitimacy, and profitability. 

Factors to look at while choosing a profitable Forex robot

It should be noted beforehand that there is nothing called the “perfect” forex robot that will increase profitability when faced with different types of market volatility and range trading. However, when selecting a profitable forex robot, one can look at the following important factors to come to a decision. 

  • Expectancy: Expectancy is the expected profit amount per transaction. It is calculated as the ratio between the total profits and losses in a trade. This is a vital statistic to consider as forex robots that risk all of the trader’s money during a trade should be avoided at all costs. Generally, a forex robot with a profit factor higher than 1 should be chosen. 
  • Drawdown:  The Average or maximum drawdown is another vital statistic that helps in deciding. Users can take note of the drawdown to estimate whether a robot has made mistakes in previous trades. 
  • Risk-Reward Ratio:  The Risk-Reward ratio represents the desire of a forex robot to take profits.  Normally, if the success rate is low while the robot’s risk-reward ratio is high, the robot would not succeed in the market at any future time. 

Why should Traders use Forex Robots for increased profitability? 

In spite of some drawbacks associated with some forex robots, especially when dealing with changing market conditions, there are some clear advantages for novice traders. Some of these are mentioned in the points below. 

  1. Better Market coverage: Compared to manual trading, automated forex robots can quickly scrutinize vast amounts of price data, performing complex analysis across multiple Forex pairs. This saves considerable time and energy which would otherwise be required while performing manual trading.  Forex robots can thus perform a greater depth of analysis which results in better trading opportunities and increased profitability. 
  2. 24/7 trading: Since forex robots are automated software, it can be left operational for 24 hours a day and requires minimal human intervention.  This opens up the possibilities of seizing on profitable trading opportunities that would otherwise be overlooked or missed. 
  3. Preventing emotional bias: Perhaps the most important benefit, forex robots are not susceptible to emotionally driven decisions, something which is quite common when traders are trading manually. When trading manually with real money, it is quite possible for a trader to get influenced by emotions. For example, a run of losses can cause “revenge” trading while successive wins can cause overconfidence. Traders have made mistakes while executing emotionally driven trades, often ending up with substantial and often unrecoverable losses.
    Bad trading decisions caused by the above factors can be avoided by using a reputable forex robot. The robot is responsible for conducting the same analysis day after day, mechanically. 
  4. Suitable for Novice traders:  It takes a combination of skills, experience, and technical know-how to become a successful Forex trader in such a competitive market. For novice traders who are struggling to learn the key tricks of the market, trading with automated trading bots can be the best solution. By using automatic trading robots, beginners can hope to attain substantial profits, which would otherwise require years to achieve on their own. 

Closing Thoughts 

There are many types of automated trading bots in the forex market that are proven to be profitable. However, with the presence of so many options in the market, traders must separate the fraudulent ones from the legitimate ones.  Selecting the right automated trading robot can help any novice to achieve a fortune, provided he/she follows the appropriate steps.