With tons of forex trading robots on the market, it can be tricky to choose the one that fits one’s needs and allows one to get the most out of its automation capabilities. Not only is it essential to conduct thorough research about them, but it is also important to know what other traders in the community are saying about them. Let us take a look at some of the parameters that one must be aware of when researching a particular forex robot.
The first and most important aspect that one must check about a particular trading robot is how they fare during backtesting. Every robot should be fully backtested using historical data to ascertain their performance. It will determine where a specific robot struggles and where it performs well.
Backtesting is done against real data with actual slippage and variable spreads. The data for backtesting is made available to all users before they decide to make a purchase.
2. Number of currencies traded
Some forex robots allow trading of all currency pairs in the world. But, others specialize in only a select few and some of them trade just one. This information is important as this will determine where you are investing your account capital.
3. Trading strategy
Before you select a forex robot for automating some part of your trading, you must decide your preferred trading strategy. Not all forex robots are made equal; all of them utilize disparate trading styles, which can make it challenging to get the one that will safeguard your bottom line.
Regardless of whether you align with hedge trading strategy or prefer a news-based strategy, there is a trading robot to do just that. So, do yourself a favor and do some research on the strategies adopted by the particular forex robot you’re interested in.
4. Limitations on order size
Evaluating the performance of a forex trader will determine how it functions with varying order sizes. Some forex robots have limitations placed on their order sizes. They may be able to perform well with a small order but are unable to handle bigger order sizes.
On the other hand, the best ones will be able to perform regardless of the order size. Of course, which forex trader you opt for will end up depending on a variety of other factors, including the size of the orders that you want to trade.
Forex robots that take too much risk on every trade are no good even if they make money. Drawdown highlights the maximum loss taken after the preceding high point and is a good risk indicator. This will allow you to get a fair estimate of what your account will look like if the robot gets into trouble.
An equity curve chart will provide a good analysis of the drawdown. The robot is profitable if you have a smooth rising curve, but it is highly volatile if you find the curve has many jagged lines with large and frequently occurring crests and troughs. These latter robots are to be avoided for their increased risk to your account. One can quickly go through the robots’ curves and select ones with a smoother curve.
6. Risk management tools
Forex robots come equipped with risk management tools that allow traders to adjust stop-loss and take-profit orders and, in turn, improve your risk to reward ratio. This risk-reward ratio determines how risk hungry a forex robot is.
Some forex robots have a very high risk-reward ratio (15:1 or even higher) that signals a risky strategy. But, having a high risk-ratio doesn’t always mean that the robot is not going to make money. It only means that it has to have a high success rate to make profits.
When changing the maximum stop-loss and take-profit orders, do ensure to backtest these new settings first and check if the changes impact your strategy.
7. Live trading results
To steer clear of fraudulent forex robots, one has to make sure that one has access to the actual results of other traders using a particular robot. Results that come out of simulations and demos can be controlled, which is why the best forex robots provide live trading results.
It is important to take a look at live trading results as this provides data on liquidity, something that simulated trading doesn’t.
The rise of automated trading has made traders’ jobs relatively simpler. But, with rampant online hacking and cybercrime, forex robots remain vulnerable to online attacks and viruses just like any other software. Therefore, precautions need to be taken to ensure one’s intellectual property, or worse, one’s capital doesn’t end up in the wrong hands. A trading robot that has proper security features will not only make you money but will also keep it safe.
It is easy for any developer to advertise its forex robot and promise high profits with little risk. But, you should remain suspicious of such advertisements. Developers will only put forward positive reviews and bury negative reviews of those who have lost money using their trading robots. It becomes incumbent upon you to compare reviews before you decide to invest in one. Only go for those robots that back up their claimed results with proof and authentication.
10. Subscription costs and refund policy
Lastly, you ought to keep in mind the subscription cost for the forex robot of your choice. Some of them can be obtained for free, but many of these can be dodgy products. It is advisable, especially if you want to secure profits, to opt for those sold in the Forex retail industry. Don’t forget to go through their refund policy in full, in case you want to switch robots and be refunded for your mistaken purchase.
Deciding to get a forex robot could be the best thing you could do for your trading, but it is vital to be aware of the factors that determine which one you should get. What you should be looking to ensure in your search is that the trading robot you get improves your long-term profitability and minimize your losing streaks.