What are Forex robots and do they really work?
Forex trading attracts a lot of people, and every one of them have their own unique approach. Some people feel comfortable when trading long-term, others find day trading or active scalping more interesting. Some people enjoy an automated process, others prefer to open each deal by themselves. Automated Forex Trading is carried out by Forex robots – special trading software which can be used without the help of the trader.
After you are done reading this article, you will have a clear understanding of what a Forex Robot is and how it works. You will also be able to identify whether or not it is effective for you, what the pros and cons are, and whether you should use such a program in Forex trading.
What is a Forex Robot?
A Forex Robot is a trading software which is installed on the trading platform. This program can independently open and close deals without a trader.
Each Forex robot is based on the trading system.
A trading system is a set of rules which dictates how all the deals should be opened and closed.
Usually, this system only gives signals to the trader, who then decides whether he should open a deal or not. If there is a bot based in such a system, it could take over traders functions and replace him.
How does a Forex Robot work?
Let’s take a closer look at the principles of robot trading, using a simple trading strategy with one moving average. If a trade, based on this strategy, is conducted manually without using the auto trading program, then the process would look like this:
- A moving average with a period of 10 is plotted on the chart. This moving chart will show the average price for the last 10 time frames.
- The price moves more sharply than the moving average and crosses it periodically.
- If the price crosses the moving average from the bottom up – it is a signal to open a buy trade.
- If the price crosses the moving average from top to bottom – it is a signal to open a sell trade.
- An open deal is closed when the system signals in the opposite direction. Thus, the trade will be carried out constantly and the direction of the transaction will be selected depending on the direction in which the price crossed the moving average.
This strategy is given only for the sake of an example, as it’s the simplest and clearest. However, because of its primitive nature, it would be ineffective in real trading and would give a large number of false signals.
In order to create a robot that trades on this system, you need to create a program that will take all circumstances into account. Even a novice programmer can easily complete this task.
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