Benefits and risks of using trading software

Modern traders actively use trading software. These are automated trading programs that can replace the human presence in exchange transactions. A trader can partially control the robot (for example, independently make decisions about entering/exiting a trade) or completely transfer his trade under the control of the program, thus relieving himself of the need to constantly sit at the monitor and observe the market. Are Forex trading robots useful and is their use in trading justified? Let’s consider their advantages and disadvantages.

Trading Robots Features

Robots operate in accordance with mathematical algorithms, which can track changes in indices and quotes, analyze the data obtained and, on their basis, make decisions about buying/selling and conducting transactions. Robots are able to carry out much more transactions than a trader in the same period of time, evaluate the market and perform all operations much faster than a person. Also, the robot can generate trading signals for the trader. In this case, the person makes the final decision on the transaction.

Trading software and robots appeared not a long time ago. With the development of AI and machine learning, more and more Forex brokers started using this feature, to attract more traders and at the same time simplify the trading process. If we have a look at the Forex brokers list on this website, each of them supports the following advantage.

Benefits of Trading Software

The use of robots gives the trader a number of advantages and simplifies the trading process. Here are the main advantages that we can mention.

  1. Saving time. There is no need to constantly be near the computer for fear of missing out on a profitable opportunity in the market. It is enough to configure the program correctly, and it will trade on its own.
  2. Forex trading robots are not subject to emotions and will not make mistakes due to fear, greed or panic. And also they will not succumb to unreasonable euphoria and will not exceed the volume of transactions, increasing the risks.
  3. The robot makes it easy to monitor and analyze the market by quickly finding trades that suit the trader’s trading style.
  4. The robot can be customized for different strategies depending on the trading style.
  5. The capabilities of the robot significantly exceed those of humans. The program can simultaneously monitor several currency pairs and financial instruments, and thus not a single profitable opportunity that fits into the trader’s strategy will be missed.
  6. Lack of random errors. The robot does not make mistakes in calculations and does not make mistakes that a trader can make due to carelessness or fatigue. The program will never put an extra digit or comma in the wrong place, and will always correctly calculate the size of a trading position.

Cons of trading robots

Along with the advantages, Forex trading robots also have disadvantages that can negatively affect the results of transactions. These include:

  1. Difficulties in creating a robot. This requires special skills and knowledge of programming languages. Not all traders have this knowledge. Therefore, the development of a robot often has to be entrusted to a third-party specialist – a programmer. But in this case, there is a danger that he will misunderstand the instructions of the trader, and an error may creep into the algorithm.
  2. The robot has limited analysis capabilities. He is able to conduct only technical analysis and cannot assess fundamental factors (for example, the impact of news on currency quotes).
  3. The robot does not know how to find a way out in emergency situations. For example, in case of unexpected force majeure situations in the market, interruption of the Internet connection, freezing of the computer. In this case, the robot will not be able to close the position.
  4. The risk of facing scammers. You can buy a ready-made trading robot, but in this case there is a danger of running into deceivers who promise “golden mountains”, but in reality sell a poorly designed program that carries great risks and does not give the opportunity to trade profitably in Forex

In addition, a periodic revision of the trading algorithm is required. As a rule, a robot is created for one state of the market, but the situation changes over time, fluctuations, declines and rises occur in the markets. The very logic of market behavior is changing, so a robot that previously showed good results may lose its relevance after a while.

The Bottom Line

A trader must always keep the situation under his control, monitor the market, be well versed in the processes taking place on it and control the trading robot, changing, if necessary, the algorithm of its operation. And for this you need to constantly expand your knowledge in trading, read special literature, attend courses or undergo free training in trading. You cannot completely let everything take its course, with this approach you can lose your deposit. It is especially important to help the robot in emergency situations. But if used correctly, the trading robot will generate income.

About the author

Venkatesan Prabu

Wikitechy Founder, Author, International Speaker, and Job Consultant. My role as the CEO of Wikitechy, I help businesses build their next generation digital platforms and help with their product innovation and growth strategy. I'm a frequent speaker at tech conferences and events.

Add Comment

Click here to post a comment