Forex Trading Robots – 4 Key Points Which See the Majority Destroy Equity

Many marketing campaigns promote forex trading robots as the way to financial freedom. However, common sense tells you that they are unlikely to deliver on this promise, or else the whole world would be using them – which they aren’t. Here are four reasons why forex trading robots are likely to result in financial losses:

– The Track Records Are Not Based on Real Trading

The track records of forex trading robots look impressive, showing huge gains with little or no drawdown. The catch: the track record is often not based on real trading, but on paper trading. In the disclaimer, you will typically see information stating that “Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading.” This means that the fact that you could make money when looking backwards is irrelevant to what you could make in real-time trading. You also have to question the vendor: if the system is as good as they say, where is the track record of real money?

-Many Systems are Curve-Fitted

Most forex robots are curve-fitted, meaning that the rules have been finely-tuned to the data. If the rules do not work the first time around, the vendors keep changing them until they do. This is flawed logic because, in reality, no two data segments will ever repeat exactly the same way. The system is therefore prone to collapse in real-time trading. The history might show that you could become rich beyond your wildest dreams, but it’s only on paper, and you cannot buy anything with paper money.

– Test with a Demo Account First

Most vendors selling forex trading systems advertise them as having no risk, offering a refund of your fee and allowing you to try the system in a demo account first. Users are known to get excited at making money in one week using the demo version, thinking that it must work in practice. However, this shows a basic lack of understanding. To judge how effective a system really is, you need to monitor it over months or years. Any system can be lucky in a few weeks. You would have to paper trade for one or two years to gain real insight into the system, and by the end of that period, you might get bored and probably see it lose.

– High Risk of Drawdown

The amount of money that some forex trading robots recommend to start with, in many cases $100 to $200, is also alarming. Even with a good system, the chances of winning on this amount are doubtful. You do not have enough to cushion losing periods, and a few bad trades will wipe out the account. Leverage combined with tiny account balances means a wipeout.

If you want to win at forex trading, get a proper forex education and do not believe the sales copy telling you that you can get rich without knowing what you’re doing. If you have the right education and mindset, you can forget about forex trading robots and focus on winning the world’s most exciting business of global forex trading.

Written by Kelly Price

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