What are automated trading systems – about forex robot
What are automated trading systems
Automated forex trading systems are computer programs that can automatically trade any strategy that you define in advance, when it comes to automated forex trading systems, used in forex, we are talking about forex robots.
What is an automatic trading system?
An automatic trading system is a program that trades for a trader. He saves hours of time because he does not have to wait for a computer, watch the market, move on the trading platform and look for a business signal. Forex robot does it all for you. AOS performs everything by itself according to predefined criteria. Of course, the criteria or trading conditions must already be defined by the trader himself. If conditions are met, AOS automatically enters the business position without human intervention. He can manage this position and eventually close it. This means that a forex robot can manage positions (BUY), hedge, roll. However, all steps (business requirements) must be fixed in advance. Forex robot can tell when to trade, for example, only in the morning, define business hours, set risk management rules, or any other conditions. Everything that can be handled mechanically and has some rules can be programmed by the robot.
What can I do with automated trading system?
Automated trading systems can handle breakout strategies, candelabras, are able to track trend lines, Fibonacci levels, moving averages and even harmonic formations. Do you trade correlations? Nor is this business strategy for a forex robot a problem, just like tracking overbought or pre-sold bands. If you do not believe in an automated trading system, you can only set up an alert about the interesting market situation that the robot has to monitor. You can receive notifications by SMS or email. Once the alert has been received, the trader can decide whether or not to enter a trade with his or her money.
AOS can trade almost all strategies based on technical analysis. However, automatic trading systems can also be programmed to trade macroeconomic events. These systems, however, are more demanding, and therefore more expensive.
AOS can be divided into two categories
Fully Functional Automatic Business Systems
These AOSs automatically enter and exit the shops without human intervention. The task of the trader is to install AOS, set it up and turn it on. The forex robot then evaluates financial market developments, opens up a trading position, adapts it to a predefined rule, and ultimately emits the position most often based on Target Profit or Stop Lossu. You also define yourself on the basis of your business strategy. The advantage of these systems is that they can be fully tested on historical data. However, the fact that the forex robot has worked in history does not necessarily mean that it will work well in the future. Another advantage is that such an AOS saves us time, is completely relieved of human psyche and emotions. Blind follows predefined rules. Stop Loss for protecting your capital!
Semi-automatic Automated Trading Systems
This trading system monitors the market 24 hours a day, and then either reminds us of an interesting business opportunity or even enters the market. Also, the closure of a trading position can either be automatic according to the rules, or a trade can be closed manually. The main feature of this system is that trader intervention is needed as compared to a fully automatic trading system. The main drawback of this type of forex robot is that you can not test it on historical data. If a semi-automatic AOS alerts a forex trader to interesting business opportunities on the market and he decides whether to enter the trade, then we are not able to test which trades we would have entered in the past, what signals would we use and which, on the contrary. In addition, human psychics and emotions are present in trading. Automatic business systems can be applied to all types of strategies. You can program intraday (short-term) trading, scalping (for a few seconds), but also swing stores. Keep in mind that the strategy must reflect the size of the account and the size of the opened positions. If a forex robot applies swing trading then you should have more capital and open up smaller positions. By contrast, short-term deals require a smaller capital pillow, and the trader can afford to open even more positions because he targets a few pips. Forex robot should always follow the Money Management principles.
Advantages of automated trading system
Forex robot works 24 hours a day, 5 days a week without fatigue. He is able to trade for you at night when you sleep, so you will not miss a chance:
It saves your time spent behind a computer waiting for a suitable business opportunity
It can respond much more quickly to a market situation than a person
It does not lose concentration as a human
He is freed from emotion and psychic pressures
Exactly adheres to predetermined trading conditions and does not change them during trade, which is customary in humans.
It can trade several different strategies at the same time on various financial instruments and time frames.
He carefully follows the rules. When you set a maximum daily loss of, say, 3 percent of your account size, you should be sure that when you look at your trading account in the evening, you will not find a greater daily loss. The same goes for profit. If you have a defined maximum daily profit of 5 percent of your account value, do not be angry with the robot that will not show you a higher rate at the end of the day. Possibility to test automated trading system on historical data and find better settings.
Disadvantages of automated trading system
Technically more demanding trading. automated trading system needs to be installed, configured, tested. In addition, buying automated trading system may not be cheap.
The automated trading system vendor does not have to tell you in detail how automated trading system works. Business strategy details can be shrouded in business secrets.
Every forex robot needs to be continually updated as the nature of the financial market changes. You may have trouble updating your purchased automated trading system yourself. The vendor can then force you to pay regular fees for updating the automatic trading system.
If you backtest automated trading system and discover a malfunction that you would like to delete, the source code may be blocked. A problem with automated trading system can occur when a power failure occurs on the computer on which automated trading system is running. Also, Internet or VPS failure may interfere with the robot’s proper functioning.
You trust your money to your robot. You do not have them completely under control. Automated trading system can not replace the human factor and the trader’s emotion.
What would you expect from automated trading system?
Do not expect the forex robot to just make money and do not lose the days associated with the loss.
Do not expect one set automated trading system to work forever. Automated business systems are characterized by the need for continuous updates.
Do not expect to buy a fairy automated trading system for a few crowns that will earn you millions on the forex.
Do not expect to have your own automated trading system program in a few days. Programming and setting up automated trading system can take a lot of time.
Beware of fraudulent automated trading system systems. Purchased automated trading system will always first test your fictitious account demo account and try to find as many reviews as possible about the purchased automated trading system on the Internet. Ask the vendor about all the disadvantages we have described above and how to deal with them. Once the vendor only promises profits and no losses or millions without risk, then it is likely to be a fraud.