In recent years, the forex market has seen the influx of software programs called Forex Robots. These Forex Robots, which are also called Expert Advisors by many, are specially designed computer programs, based on a set of forex trading signals. They are usually designed to help traders determine whether to complete a buying or selling action for a currency pair at any given point. The main purpose of these robots is to eliminate the psychological and emotional elements attached to manual trading, which is the cause of many ill-informed trading decisions.
Some of the best forex trading robots have been proven to be successful in the past, with many notable cases of traders earning big. However, the current forex market is filled with decoys, frauds and scams, making it harder for people to select the best Forex trading robots. A proper, well-informed decision can be taken if prospective customers check an EA or root’s statistics before making any decision. There are certain factors in the statistics that help traders make a better judgement.
Finding EA’s and Forex Robot’s Statistics
The first thing to do to avoid scams is to always look for EAs and robots which are tested by independent websites. Myfxbook and fxblue are two authoritative sites that offer legitimate backtests and live statistics. Because EAs involve significant risk, prospective customers should always look for third-party statistics to confirm their doubts or ideas. The absence of these statistics is a definite red flag.
This doesn’t mean that all robots tested by authoritative sites are successful. Certain stats need to be further compared to make a better informed decision. Some of these statistics are mentioned in brief below.
Statistics Important for Choosing a Forex Robot
- Expected Profit per transaction: This statistic indicates the amount that can be earned on each trade on average. They are normally based on trading history and thus, do not guarantee future results. Never the less, it is an important indicator to use while selecting a forex robot.
The expected profit can be calculated as: [percentage of winning trades, which is the average profit per trade] subtracted by [the percentage of losing trades, which is the average loss per trade.]
- Drawdown rate: Drawdown rate is another important indicator used to perceive risk. It calculates the percentage of maximum loss recorded since the last highest point. As a result, it gives the trader an idea about the potential drop in the trading account if the robot loses trades. Drawdown rates can be analyzed by using an equity curve chart. Notably, a rising curve indicates that the robot is profitable.
- Risk Reward Ratio: This statistic is indicative of a robot’s appetite for risk. For instance, a forex robot that employs a 5 pip take profit and 40 pip stop loss would have a risk-reward ratio of 8:1. It thus requires a success rate of at least 89% to be perceived as profitable. EAs and forex robots which have a 15:1 risk-reward ratio tend to be scalpers and are very risky in nature.
Some additional considerations
Besides looking at the trading statistics of a particular EA or robot, there are some other additional considerations that can be taken.
- Transparency: When studying EAs and trading robots, it’s always a good move to check the level of transparency offered by the provider. The provider should provide detailed information about the team behind the product, where they are based and accolade if available. They should also attempt to properly describe the trading strategy they are using. Many EAs tend to use high-risk strategies such as scalping and martingale, yet do not reveal it clearly on their sales page.
- Back-tests/ live statistics: As a rule of thumb, EAs and robots which fail to present relevant statistics and back-tests on third-party authoritative sites, should be ignored at all times. Fraudulent EAs tend to follow this practice to deceive prospective customers.
The present forex market is filled with such forex robots, each claiming to generate substantial gains for their clients. However, taking note of the above points of consideration can help traders make a well-informed decision. The trader should also carry out some independent research on the shortlisted forex robots, before coming to any conclusion.