WHAT IS FOREX BOT TRADING? Forex trading has been fully automated via sophisticated software that uses an algorithm to scan the market for potential setups. The algorithm contains predetermined criteria that search for matching market conditions and execute trades automatically. To get more news about Forex Robots Trading, you can visit wikifx.com official website. The user can customize the settings of the forex bot and instruct it to search the market for high-probability trades without opening positions and instead act as a trading signals program. A forex trading bot has been marketed as a passive income stream, especially useful for beginners or traders lacking time to analyze markets. Although its use comes with a caveat, forex bots have provided profits and made trading easier for many traders. How Does Forex Bot Trading Work? A trading robot has substituted for active traders by searching the market for setups that have a high probability of yielding profits. The software contains an algorithm programmed with criteria obtained from technical analysis and then searches the market for specific chart patterns and price action. Once the forex bot has found a setup that matches its predetermined criteria, it opens a trade. The robot tracks the price movement of the open position and automatically closes it when it has reached the profit level. The software can determine if a position should be bought or sold. It sets stop losses and profit targets. In some cases, the software doesn’t use stop losses because it’s chasing a short profit range. Are Trading Bots Legal? Using an FX robot to enhance your trading is legal. The only restriction that could be imposed is by your broker. Forex robots are integrated into your trading platform, so some brokers may prohibit their use because they tend to generate high-frequency trading, which could slow down the platform. Another issue brokers have with trading bots is that they are prone to viruses and can be hacked. Those threats make brokers apprehensive about implementing them on their platforms. How to Use a Forex Trading Bot The benefit of the best forex robots is that they are fully automated. Traders can activate them to execute trades whenever the market is open. Using a forex bot requires integrating it into your trading platform, and most are compatible with MetaTrader. Alternatively, forex bot trading can be used for generating trading signals. The bot scans the market and alerts you of potential setups but doesn’t open trades on your behalf. Effectiveness of Forex Robots The main advantage of using forex robots is the removal of the psychological element. Bots operate purely on technical analysis, so they’re not apprehensive about entering trades offering a potential setup. Trading bots are also not driven by greed, so they exit trades based on market conditions and not desired outcomes. But fundamental factors play a tremendous role in trading. Forex bot algorithms exclude fundamental factors from their criteria and cannot adjust to changing market conditions the way humans can. The exact percentage of bot effectiveness is difficult to determine as results vary depending on the type of robot used and the duration of use. The general market sentiment is that trading bots will not make you rich. While they can lock in significant profits, their results are highly impacted by macroeconomic conditions, affecting their overall results. Profitability of Forex Robots The two main factors that impact the potential profits traders can earn are the market’s price action and parameters programmed into the software. Profitability isn’t guaranteed, and results may be inconsistent. Some traders may earn a profit in the first month because of favorable market conditions. But they can incur losses in subsequent months from high volatility arising from fundamental factors. Usually, advanced traders gain the most benefit from forex robots because they use their trading experience to set parameters likely to yield profits. Some beginners have profited from forex bots and deem them to be a better option than active trading because of their lack of skills. Risks of Bot Trading Trading is risky whether you do it yourself or let a program do it for you. Although trading bots can be beneficial because they remove the psychological element, they also contain flaws that may hinder your progress. Bot Scams Auto trading has become popular with beginner traders and those lacking time to analyze markets. The market is saturated with trading bot companies claiming to offer a solution to make you rich. Some trading bot companies even offer a money-back guarantee. But many of those companies close their operations after luring in a significant number of clients. You should be careful of companies promising bots that provide consistent or high profits. Market conditions are unpredictable, and no one can guarantee consistent profits. Poorly Performing Algorithms The effectiveness of a forex bot is determined by several factors, but one of the key ones is the programming of the algorithm. Highly effective bots are usually designed by experienced traders possessing high trading skills. Forex bot algorithms can perform inconsistently because of poor data inputting. Viruses can infiltrate forex bots, thereby compromising even the most effective data. Another risk of trading bots is being compromised by hackers. Flash Crash A flash crash is the abrupt and rapid decline of market prices. Those events usually stem from macroeconomic conditions, which forex bots aren’t programmed to analyze. Significant price declines can drastically affect your account’s balance when a bot hasn't placed a stop loss.