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 profit 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 will not 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 ever 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 do not 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 desires 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.