When you first start to hear about automated trading systems it
definitely sounds like a dream come true. You get to trade a successful
strategy made by a successful trader without any effort with the system
making all relevant decisions regarding your trading activity. The first
thing that people new to the area of automated trading hear is how
great trading with robots is and how many great advantages it has.
Expert advisor sellers talk about the great aspects of robots like not
having any humans involved and how this trading technique can make
anyone reach within a very small amount of time. However it turns out
that trading with Forex robots - Forex automated trading systems - has
many disadvantages that not only make profiting from Forex automated
trading systems hard, but even harder than making a profit manually in
trading. Within the following paragraphs I will attempt to explain some
of these disadvantages to you giving you an idea of where you should
start if you really want to be successful with automated trading
systems.
First of all, it is good to understand why automated
trading systems are not a holy grail and why they won't be able to make
everyone rich, even if trading is simply mechanical. The main
disadvantage of Forex robots is that due to the simplicity of their
loading and execution, they stimulate usage by people who have little or
no experience in trading. Since the robots are still being run and
executed by humans they still fall victim to human psychology. In the
end someone decides whether the robot will be running or not and this
makes people unsuccessful with them. How do you know if a system is
profitable? How do you know if it will work under varied market
conditions? Do you stop trading them within a draw down?
When
people start trading an automated trading system and they fall into an
unprofitable period, they simply do not know how to act because they are
not traders; they are simply regular guys who have entered the
automated trading arena with the hope of finding quick and easy riches.
Because they start to lose money they simply quit trading the robot.
Since all long term profitable systems eventually get into long term
periods of draw down (draw downs that in my experience last from 100 to
even 500 days), people end up quitting all trading systems they find
until they start to learn - the hard way - how automated trading systems
work. Most of them will not take this road and they will never learn
how to evaluate, use and be successful with Forex robots and the few
that do will take a journey that will most likely last 3 to 10 years.
Therefore
the main disadvantages of automated trading systems are that it will
take a lot of knowledge to learn how to use and trade a robot
successfully and that to use one you don't need almost any knowledge.
You get a very dangerous combination in which people can very easily get
their hands on the software but judging the quality, evaluating the
systems and being able to trade those that are indeed likely to be long
term profitable is terribly hard. In the end, anyone who wishes to truly
achieve success in automated trading needs to understand manual trading
and programming, they need to understand the markets and the computers a
very difficult thing to do indeed. It will not be easy, in fact it will
be terribly hard and you will many times get disappointed and wish you
had never began this journey in the first place. Is it worth it? I think
that when you finally get there you will see that it is.
Think
about it, if it was that easy everyone would be living from automated
trading... The reason why everyone is not, is because the above
mentioned disadvantages make successful trading with Forex robots
absolutely hard. However, it is certainly possible.
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