Forex trading is all the rave these days, with beginner and expert traders employing different trading strategies in the hopes of reaping big returns. While manual trading is a commonly preferred trading method for most people, the past couple of years have seen a surge in automated trading through the use of forex trading robots, also known as Expert Advisers (EA), or simply, “bots.”  

But how well do forex trading robots stack up against manual trading? And are they even effective at all? Keep reading to find out.

What Are Forex Trading Robots?

Forex trading robots are computer programs that generate forex trading signals to help traders determine whether to buy or sell currency pairs at a specific time. Trading bots typically track price data in forex markets, then aggregate the analysis to determine when’s a good time to enter or exit trades. Forex trading robots are available to traders 24/7 and can be easily purchased on the internet.

How to Choose A Forex Trading Bot

There are plenty of different trading bots in the market, and while some of them are highly reputable, others are very low quality and may even be scams.

Therefore, when shopping for a trading bot, it’s critical that you do due diligence to ensure you’re buying from a trusted source. It’s equally important to have a thorough understanding of the trading bot you intend to buy and how it operates to ensure it’s aligned with your trading goals.

With that in mind, there are several factors you should consider when buying a forex trading bot. These include:

•     Credibility

When choosing a forex trading robot, you want to ensure that your selected option is credible and trustworthy. One of the easiest ways to determine whether a bot you’re looking to buy is legitimate is to look up reviews and testimonials of other users. While companies that design and sell bots are likely to inflate the quality or value of their products to win more customers, users will generally tend to be honest in their assessments.

•     Drawdown

Drawdown refers to the level at which a trading account is down from the peak before it starts rising back to the peak. Each trader has their own preference regarding drawdowns, so it’s vital to choose a bot that matches yours.

•     Backtesting

In forex trading, backtesting refers to the process of simulating a trading strategy using historical data to determine its accuracy. Ensure the trading bot you choose has been back tested with different currencies and market conditions.

Are Forex Trading Robots Effective?

For most beginner traders who are just venturing into the market, using forex trading bots can seem like an obvious way to start. After all, top-rated forex trading robots can easily identify profitable trades even in volatile markets, and select the most viable trades to increase the chances or profits and minimize losses.

With that said, leveraging forex trading bots doesn’t mean leaving the program to do all the work while you go along with your day without a care, waiting for profits to trickle in.

Truth is, as useful as trading robots can be, they are not devoid of limitations or risks. For instance, many trading bots do not effectively respond to market news updates and can become out-of-date as the market’s trading conditions change.

Moreover, as mentioned earlier, many bots marketed as legit tools end up being scams. So, whether or not you’re successful using bots to trade ultimately depends on the program you choose to work with.

Bottomline

Trading using a bot can be quite tricky, as you essentially hand over control of your trading account to a computer program. If there are any kind of errors, you risk incurring serious losses or, worse, having your account blown out. Nevertheless, top-rated bots are still worth trying out if you’re just starting out – as long as you keep your expectations in check and try not to become over reliant on them when trading. And if you would rather use a forex trading broker, check out FX-List for licensed and trusted options.