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Forex Trading Robots Guide

Forex trading robots have gained significant traction among retail investors over the last decade as technological innovations and growth in online trading platforms have helped in democratizing institutional strategies to retail traders. Previously, robot trading in Australia and other parts of the world had only been available to wealthy investors due to the requirement of large resources and powerful computers.

Based on the user’s input, forex robot trading software uses algorithms and artificial intelligence to find opportunities. Making a decision in a split of seconds through computer-based models has enhanced profit potential beyond what a human could ever achieve. These robots don’t make trading decisions on their own. They work according to the user’s input.

Investors who have no prior trading experience or who do not have the time to watch the markets all day are ideal candidates for forex robots. Robo trading is also beneficial to experienced traders since they already know more about the market, which makes it easier for them to set trading parameters and execute strategies.

Study results from 2019 show that around 92% of the Forex market’s trading is carried out by automated programs rather than humans. Often, algorithmic trading is used synonymously with robot trading systems.

Traders can easily find a large number of Australian forex robots on the internet, but we recommend traders be cautious when selecting a bot and depositing funds. Many scam companies convince traders to deposit funds to earn unrealistic returns with a money-back guarantee. But these bots disappear a few weeks later when they get money from you.

The following guide explains how forex robots work and what to look for when choosing the best forex robots for Australia in 2021.

What is Forex Trading Robot?

Forex trading robots are automated trading systems that use algorithms and other technologies to analyze a large amount of data in less than micro-seconds to find trends and to initiate and liquidate trades within a set of rules and parameters.

Forex robots are computers that trade forex automatically. The elimination of emotions from trading is among the biggest benefits of robots. Automated forex trading robots are usually integrated with online forex brokers or exchange platforms. A large number of these forex robots are built with MetaTrader, to let traders find signals and place orders, and manage trades.

Is Forex Trading Robots Legal in Australia?

Forex robot trading in the currency markets is completely legal in Australia. Countries around the world including Australia permits traders to use algorithms and robots for trading. The legality is not only enough, but investors should also look at whether the trading platform is registered and reliable.

It is common for sellers to offer a money-back guarantee, but the guarantee goes away when the seller disappears. Investors should do due diligence when selecting a trading platform. Factors like backtesting, reading reviews, compliance with regulator’s policies, and impressive win rate could be crucial in figuring out the reliability of the platform.

How do Forex Robots Work?

As the forex market works 24 hours a day, forex robots are used to monitor and capitalize on even a small opportunity which human is unable to detect with traditional methods.

These robots are programmed to detect trends and patterns like reversals, breakouts, momentum, and other technical indicators.

If the trend falls in the parameters, forex robots will immediately place the order to buy or exit the position. Programmers backtest their software using historical data to make sure that robots are developed to minimize losses, maximize profits and reduce human interference in trading.

The robot is useful in the sense that they will automatically carry out trades, but robots cannot guarantee profitability since robots works within the set parameters.

Best forex broker Australia, a review portal platform, helps you in finding out how to use your forex robot effectively and avoid being scammed.

How to Use Forex Robots Successfully?

For those considering using a forex robot, here are a few suggestions on how to make the most of it:

  • Don’t expect substantial returns: Robots are made by humans and their performance is based on programs and features set by developers and traders. Robots don’t have any feature of creative thinking to think about what will happen in the future. Robots make future predictions based on historical data. It’s a good idea to do due diligence and not rely completely on robots.
  • Due diligence: Viruses and hackers impede many robots, so it’s important to find a reputable provider. Select a robot that has been on the market for a while, making sure that there are lots of positive reviews and online testimonials. This will also help in avoiding scams.
  • Backtesting: Always test the robot and see whether it fit your investment goals and trading strategies. Using a trading robot without backtesting could expose you to various risks. This is because most programmers choose the backtest with the best results to market their robot, regardless of the fact that hundreds of other backtest failed to demonstrate accuracy.
  • Trade robot with demo account: You should try the software that offers a demo account before depositing money and using it in real-time trading. Moreover, it is always a good idea to experiment with more than one trading software option to choose the best that suits your trading style.
  • Setting up trading parameters: This is the most important factor that determines your win rate. A forex trader should have a solid trading plan before trading in real-time and backtest that plan in a demo account. A robot is a software that is equipped with technologies to find out trends and it initiates or exits trades only based on traders’ parameters. Trading parameters include price, volumes, moving average, and other technical metrics. For instance, you set a parameter to buy an AUDUSD pair whenever the price falls below 0.75 or the price trades above the 100-day average. The forex bot will wait for the opportunity and execute the trade whenever trading criteria meet.

What are the Advantages of Forex Trading Robots?

  • Fast analysis and order processing: Robots are backed by modern-day technologies like artificial intelligence and algorithms that help them in analyzing a large amount of data in micro-seconds to come up with future predictions. On top of analysis, robots instantly process the order when finds an opportunity within the parameters.
  • Eliminates emotions: Traders frequently fall in love with certain currencies and hate others due to phycological emotions. Trading based on emotions instead of technical and real-time factors is one of the biggest mistakes both beginners and advanced traders commit. Trading through forex robots is one of the best solutions to eliminate emotions.
  • Multiple trading strategies: Forex robots can monitor and trade multiple currency pairs and trading accounts simultaneously more effectively. The trader can make profits from implying different strategies at the same time to make the most of the market.
  • Trade limitations: A forex robot cannot continue buying or selling currency pairs on its own and is limited to parameters.

What are the Disadvantages of Forex Trading Robots?

  • Risk factors: Trading through robots also involved risk. It is true that robots work at a lightning-fast pace, but their trading is limited to the set parameters.
  • Robots are expensive than human trading: Some online forex trading robots charge high commissions and fees, which could have a huge impact on overall returns. It’s key to review the fee structure before choosing any platform.
  • The threat of scam: Scammers mostly use forex robot trading platforms to scam innocent traders. They offer unrealistic promises and returns to lure traders. So be cautious when picking any platform for trading.
  • Fundamental data: The forex trading robot analyzes technical factors and past data and misses to gauge the economic and fundamental impact on prices.

Strategies to Generate Best Results from Forex Trading Robots

Forex trading robots work best with short-term buying and selling strategies. The majority of traders use robots to take advantage of small price discrepancies.
Scalping and High-Frequency Trading are among the widely used trading strategies. The trader can also automate any trading technique but this depends on the tools and features a bot offers. We discussed many other strategies below that trader can use to make money from the world’s most liquid markets.

  • Scalping: Buying and selling currency pairs frequently to make profits from minor price changes in intra-day trading is known as the Scalping strategy. It’s quite difficult for traders to manually point out those changes with traditional methods and enter and exit traders at a super-fast pace. Trading robots target to generate a few pips in profits from every trade to build profits.
  • High-Frequency Trading: High-frequency trading, or HFT, is a method of trading in which a large number of orders are transferred in fractions of a second using powerful computer programs. Based on market conditions, it analyzes multiple markets and executes orders accordingly.
  • The trend is a friend: By analyzing the momentum of an asset in a particular direction, trend traders seek to capture gains through investment. A trend occurs when the price moves in one direction, such as up or down. In the same manner, trend traders may choose to short an asset when it is trending lower.
  • Day Trading: In day trading, currency pairs are actively bought and sold within the same day in an attempt to profit from short-term price fluctuations.