Problems With Forex Robot Trading Systems

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I often come up against Forex Robot sellers on the various forums out there and I am always
amazed how far they will go to prove they have a profitable system. They will often post multiple metatrader
demo accounts, quote the “outstanding” strike rate and continuously post spam comments across the various forums.

The most notable problem I have with these people is that they, nine times out of ten, do not trade the robot for real. It’s all based on demo accounts. Even my attempts to get these people to provide real trading accounts by offering a financial incentive or free advertising on this site have all failed.

The problem with not using a real account to test these system is that there will be issues with fills that you won’t get on a demo especially on forex trading. Ultimately you are trading through a broker and on an open market and you order will not get filled at the price you would on a demo where you get automatic fills.

The other issue with these forex systems is the strike rate. The strike rate seems great but it comes at a cost. The cost is that risk to reward ratio. Because they have a high risk to reward ratio it only takes a small drop in the strike rate to turn the system into a loss maker. The drop in strike rate could be as little as 5% i.e 5 trades in 100 or looking at it another way….a system that trades once a week could turn into a loss maker if it had two extra losses a year compared to the stated strike rate. If I know anything about trading systems, I know that strike rates fluctuate and they fluctuate in a fairly big range, certainly more than a 5% range.

If you were trading a system for a year and “paying” yourself a wage and then the 5% strike rate shift happened, your account would decline and you wouldn’t be able to pay yourself as you would need the funds for margin requirements.

Or even worse…you watch this system trading all year..making good money and then you have a couple of bad weeks and you end up break even for the year. You have essentially have earned no growth on your money for a whole year despite all the time you spent checking your computer to make sure the EA is running properly.

The other thing that annoys me about alot of these systems is the “open trade” issue. This is a big problem in my opinion. Some systems often leave several trades open in a loss and open up new position at the same time. If your trading system hits a shift in strike rate you could end up with several trading positions open in a big loss which may drop your account below the margin requirement and you would not be able to continue to trade. Furthermore, should you require to release your trading funds, for whatever reason, you will most likely have to close a trade in a loss which on paper will be a winner…eventually. Simply..it is just a very risky way of trading.

The basic concept of trading is to exchange money for risk. The question is…”is a forex robot trading system” and acceptable way of trading.; is it an acceptable risk to take. Give the reasons above (and several more not discussed) I would say probably not. Although I always say I am happy to be proven wrong.

4 Responses

  1. This guy does a pretty good job of going over automated forex trading robots. He likes Forex-Megadroid Pro.

  2. Jason says:

    Heard a lot of bad things about megadroid pro

  3. automatedforextradingrobot says:

    Who is the best forex broker in the market? Like tight spread in all condition, allow scalping, thanks

  4. Jason says:

    I use Interactive brokers but most seem to like 3rd party brokers who deal in mini lots and can connect Metatrader 4 as their charting and trade management program. FXCM, ALPARI, BROCO, MIG…they are all names that pop up quite frequently.

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