The Dangers of Automated Forex Trading Systems
Many traders look at automated forex trading systems as an easy way to make a profit on the forex market. While these hands-free systems do offer this you need to consider the dangers of the system as well. You should question whether the benefits you are going to get are worth the risks of the software. You also have to think about the overall costs of your system and what else you have to do.
Forex Trading Systems
Before you use an automated forex trading system you should consider why you are looking at them. If you do not have time to trade on the market you should look at other options as well. Automated systems are often used by part-time traders who still work a normal day job. If this is the case then there are other options as well. The main point you need to consider is whether you actually want to trade on the market or just make money from it. If you want to trade then there are many part-time trading strategies that you can use.
The Cost of the System
One of the major points that you should look at with an automated system is the cost. The price of these systems varies from under $100 to a few thousand. You should consider whether you will be able to get your money back with the system and if the system is worth the price. There are some systems that are free, but the general consensus on these is that they are not very good.
The Systems Reputation
You also have to consider the reputation the system has. This reputation can be found on forums and review sites. When you look at these reviews you should consider what is the systems fault and what is the trader’s faults. Many traders do not use their systems correctly and this leads to losses. However, these traders then blame the system for the loss and write a bad review.
How Hands-Free is the System?
Most traders who use automated trading systems are looking for a set and forget system that offers hands-free trading. However, you have to consider whether this is something you can actually get. Many traders state that you need to monitor what the system is doing. Software is subject to bugs and failures so you need to check that the system is still working correctly.
You also have to check the market conditions. As automated systems cannot differentiate range and trend markets they use the same indicators in both conditions. This can lead to losses because trend indicators do not work in a range market. You need to check what the market conditions are and set your system to only trade on these markets. This takes away most of the hands-free nature of the system.
You Need a Trading Strategy
Even if you are going to use an automated system you still need a trading strategy. When you set up the system you need set the trading rules. These rules include what indicators the system should look for, the risks it should take, the stop loss orders and the take profit orders. The fact that you still have to learn about trading negates a lot of the benefits of automated systems.