Robots are in style in the foreign exchange market.
Fully-automated trading algorithms that spit out winning trade after trade in your account, while you go about enjoying your day. "Ahhh…This is the life!"
Well, the above utopian scenario is the kind of picture that FX robot vendors often paint in their hyped up YouTube promotional videos and website ads; ads that redefine the unethical and push the boundaries of deception.
Oh, and did I fail to mention that you can buy this wonderful trading robot for just $99.99?…It's all science fiction and an extreme misrepresentation of facts.
Robots Don't Work Forever – Market Environments Change
Trading robot vendors are like beauty product companies. Just when you thought you had found the miracle wrinkle-remover cream or best magic ointment to prevent the loss of your 10 remaining, active hair follicles, they come up with something "better" and more miraculous than before.
They know people get bored easily, so they keep spitting out "new-and-improved" products to please the crowd. It's as if they're subliminally broadcasting (every 6 months or so): "Forget about our last scam; this one really works!"
It is no different with robots in the FX market.
You've heard some of the names, right?
FAP Turbos, Mega Droids, Wealth Robots?
"But I've seen all the testimonials on YouTube!", you argue. We've seen them too, but guess what? You can pay as little as $5 a pop for those nowadays.
The truth is that market environments change all the time because trading activity and liquidity are ever changing. The market on EURUSD might shift from trending to range bound and blow a lot of trend following robots out of the water. This happens all the time.
As a result, automated systems don't work indefinitely, and all the hyped brand name robots suffer from a fall from grace….eventually!
Trading Robots Hide Real Risk – MT4 Closed-Trade Deception
How do robot vendors do this?
Simple; using the MT4 or MetaTrader 4 Platform.
MT4 is a great platform, don't get me wrong. We use it as well and offer demos of it on our site.
The problem is that a statement from MT4 doesn't give you a true representation of maximum risk (or drawdown). After a position is closed, MetaTrader only takes into account the entry and closing prices; not the "trajectory" of the trade – so you don't know how far a position was in the negative before it was closed out.
So what many vendors do is show you historical transactions of the robot that look short of miraculous, but don't tell you that the ride to get there was EXTREME! It's like marrying the perfect girl – the girl of your dreams – only to find out on your honeymoon that she had been wearing a mask all along. Ouch!!!
You won't see the mask come off until you buy the robot and let it loose on your trading account.
The Importance of a Human Robot
A what?!?!? Even though there's nothing "human" about a trading robot or algorithm, it is crucial to sprinkle human discretion in the recipe to achieve long-term success.
As mentioned earlier, the heart beat of the market changes unpredictably and when it does, it takes a lot of the popular Bots along with it.
That is why it is so important for human beings to get involved. A good human trader knows when to override "the machine" and take over, as well as when it's time to modify it or even scrap it altogether. Consequently, long term success in automated trading requires a certain degree of human discretion.
Some hardcore algorithmic traders would argue this point, claiming that it is better to factor human emotions completely out of the trading equation. But in over 30 years of trading experience, we've never seen Mr. Robot reach the finish line playing solo.
That is why in all the automated projects we're involved in, there's always a professional money manager behind the code.
We will be launching a complete, new trading system based on our proprietary trading models soon. This system will be offered as an educational tool for traders who become part of our FastTrack Program for either personal improvement or to manage our proprietary or client capital.
After the above launch, this system will be coded into one or more robots and offered to Forex Day Trading's clients.
Continue to check our robot section and blog often, or like our FaceBook or Google+ page to be notified when our unique, automated system is launched.