Forex, the market where currency pairs are bought and sold, is the most liquid market in the world. Traders who aim to benefit from favorable exchange rate movements, trade round the clock, as it operates 24 hours a day, five days a week. For ensuring profitable forex trades, one needs to be able to interpret the leading and lagging indicators.
Since interpreting signals is not a particularly easy task, especially since the indicators tend to produce conflicting results, forex signal systems, both manual and automated, caught on in a big way.
Automated forex signal systems that did not require the presence of the trader to execute trades, took precedence over mechanical systems, since the latter required the trader to be present for the purpose of buying and selling based on the signals received, and thus was not totally effective in removing the human element.
Automated systems, or forex automatic trading robots, are based on computer programs that determine currency pair to be bought or sold at a given time by generating standard trading signals. A day trader, using the 5 min or 15 min chart for judging the market direction, may use the robots for profit trades.
How are they Designed ?
Forex robot systems are designed by professional forex money managers, who use past performance and trends to simulate results that may reflect the actual trading environment. They are based on hindsight which, as we all know, is 20/20. An account may not achieve profits similar to those shown, since past performance is not indicative of future results.
Criteria to Determine the Best Robots
The forex robot system should be fully automatic in order to be successful in eliminating the human element and ensuring round the clock trades without any supervision. It should eliminate the need for brokers who were previously required to manage accounts.
Back Testing Should Yield Results
This is important since simulations are based on hindsight and past performance.
Inbuilt Loss Protection
It should have an inbuilt loss protection mechanism in order to ensure that people using this system do not incur huge losses because of wrong signals.
The performance of this system should be constantly monitored by experts in order to improve and optimize trades.
The automated trading software should be of use to traders, who are not comfortable trading on their own, but want to manage their own account. Institutional investors who want to invest across asset classes, to get the benefits of diversification, should find it useful. Brokers should be able to offer these systems as additional service to customers.