4 Telltale Indicators That Automated Forex Trading Will Lose You Money
Article by Barry McDougall
It never ceases to amaze me that there are multitudes of people on the internet, complaining of losing untold amounts of money and time trying to use forex bots to automate their trading.
To be quite honest, I don’t know what they really expected. Automation is one thing, and free money is another. You just don’t go into this without having some background knowledge, and without having done some research beforehand.
I faced this very same problem when I first started looking for a way to automate my trades for some passive income.
What I discovered was that these kinds of situations share many common characteristics that are only truly obvious in hindsight.
What follows is a brief list of the most common things that I see go wrong time and time again, starting with:
1. The home page of the automated forex trading bot looks like it is done by professional marketersThese should really set off a red alert in your mind. If the product page looks like more like a marketing exercise than a legitimate forex bot, well then it probably is. This market is full of people looking for a quick buck, and has just as many people on the other end ready to exploit that fact – you should probably steer well clear.
2. Most people simply don’t take notice of third-party dataMy best advice is to search forums for real user reviews. Perhaps more importantly, focus on finding strong returns in third-party tests of accounts from various automated forex products. Because demo account performance often differs from the real thing, many highly regarded Forex review sites such as Forex Peace Army perform independent tests using real accounts.Keep your eye on these sorts of test accounts and see if they match up with the claims that an automated forex trading product is making.
3. You don’t actually know how to trade forexI predict that you won’t like this part, but I need to say it anyway. In most cases, you can’t just leave an automated forex trading bot to its own devices. Your own trading experience would be invaluable in setting it up and monitoring its progress. Failure to do so could lead to you biting a huge stop-loss because you missed some clear signs that things were going awry. My advice is to learn enough of the basics to do some manual trading of your own. Only then, once you appreciate it, should you turn to automated forex trading.
4. Impatience. You’re not giving any bot the time to prove itself properlyThis is pretty obvious, but often overlooked. You might actually have a decent EA, but you’re just switching to a new one so quickly at the first sign of failure that it’s not really giving any of them a chance to shine. Properly evaluating a Forex robot should take you a reasonable amount of time. They don’t just call patience a virtue for no reason.
Take care to implement the things in that list, and you will be that much closer to making forex bots work for you.
About the Author
Barry McDougall has been trading shares and foreign exchange for 7 years. Accompanied by his associate Glen Fields, he has created a website that tries to navigate the seas of the automated forex trading market, and emerge with some invaluable advice for newcomers and old-hands alike.
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