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What Is a Forex Robot?

These days, it is becoming more and more common for traders to utilize modern methods of technology in their trading and there are many advantages to doing so.

Traders are increasingly likely to use trading systems or software that allows them to automate the trading process — thus reducing the problems of emotional attachment to a trade or a lack of trading discipline. A Forex robot does exactly that and one of the most popular ways to use one is via the MetaTrader 4 platform.

MetaTrader 4

The MetaTrader 4 platform offers a complete solution to a trader’s needs, consisting of charts, news feeds, and more. And, by coding in the native MQL4 programming language, it is also possible to write custom built indicators or even trading strategies — also known as expert advisors.

Expert Advisors

An expert advisor (EA) is another name for a Forex robot, one that has been developed to be used on the MetaTrader 4 platform. Since it can be custom built, an expert advisor can be designed to implement any trading strategy or risk management system so long as the designer knows how to code it into the program.

For example, a trader may design an EA to open positions in the market at a certain size after a moving average crossover.

Benefits

The main advantage of using a Forex robot is that it takes the emotion out of trading, which if not addressed, can be a big barrier to many traders. Fear, greed, and stress can build up in manual trading all too easily, leading a trader to lose money and get frustrated with the game.

A robot on the other hand, will implement the chosen strategy flawlessly every time and with a high degree of accuracy. It will also make difficult risk management calculations in the blink of an eye, much faster than a human trader. Not only that, but robots can be designed to trade around the clock and on different markets at once, meaning that you need not have to sit in front of your screen all day and all night.

In short, a Forex robot can take much of the hard work out of trading — that hard work is done beforehand — developing and testing the trading idea.

Limitations

Of course, there are no shortcuts to making money on the Forex markets and working with a Forex robot brings with it its own inherent limitations.

For one thing, Forex markets are fiercely competitive and coming up with a robot that is able to beat the market is a notoriously difficult thing to do.

Indeed, it is not enough to design a robot that works over a couple of weeks data, the robot must work over several months, if not years, of historical data and undergo rigorous statistical testing to prove that it works. Because if a trader cannot be confident that the robot works, they will more than likely abandon it when times get tough.