If you are a really experienced Forex trader, automated Forex software can expedite your research and help you make better trades and more money. However, the problem is that most forex software is marketed to people who have very little to no experience trading forex. Those who sell this automated software would like these inexperienced traders to believe that they can make a lot of money using their software without knowing anything about Forex.
If you are just beginning to learn about the foreign exchange and even if you know a little but you aren’t an advanced trader, I highly recommend you stay away from automated Forex software.
I think all you’ll get out of it is a boat load of problems and the probability that you’ll lose a significant portion (if not all) of your investment is quite high.
Here are 3 major problems with automated Forex software.
Forex Software Is Difficult To Configure
No software is really FULLY automated. Before you start using the software, you will be asked to “configure” it. You will be setting preferences and you will be asked to make several choices. Here’s the problem. This set-up assumes you already know quite a bit about Forex. If you don’t, you will not be able to make intelligent decisions. Remember also the old expression, “A little knowledge is often more dangerous than no knowledge.” Just because you’ve studied up doesn’t mean you really know enough to make good decisions regarding the set-up of the software. Forex is a VERY complicated topic. Frankly, unless you are an advanced trader, you probably don’t know enough to make wise choices.
Forex Software Is Based on Backtesting
Most automated Forex software systems are created by a partnership between an experienced trader who has developed some sort of winning Forex strategy and a programmer who can automate that strategy. Sounds good, right? Well wait, there’s a major problem. To develop the software, the programmer takes OLD data based on OLD trades and “backtests” the software. However, the foreign exchange is in a never ending state of flux and what worked well in the past probably isn’t going to work well in the future. This is simply not something you can rely heavily on to make FUTURE trades.
The Software Can’t Keep Up With the Volatile Forex Market
I probably can’t emphasize this enough to make it really sink in but I want to try to save you from making a big mistake. The Forex market is EXTREMELY volatile – VOLATILITY is what makes it so profitable if you’re an advanced trader but it is also the main reason most people lose their investment. The better software attempts to remedy this problem by providing frequent updates, aka “software patches” (some manual, some automatic). However, it’s never quite fast enough to really keep up. Also, no matter how well the software is programmed, no matter how good the strategy was that the software is based on, it can not be programmed to deal with every unexpected news event that affects the forex market. It is quite common to see the foreign exchange go on a roller coaster ride or follow a totally unexpected pattern after such a news event.
For the 3 reasons above, it is best not to use automated software unless you are an advanced trader, and even then, it is best to just use it as a tool – i.e. you don’t want to rely too heavily on it for your trading decisions.
The best solution to these problems with software is to not use automated software at all. If you are new to forex trading or you are at the intermediate level, you would be much better off getting real-time forex signals from an experienced forex trader with YEARS of a winning track record and following what they do. If you follow a really good forex trader, you’ll see how they adapt to the ever-changing market and how they deal with unexpected news events. You’ll learn as you follow along and you’ll make some really good money while you learn.
I always recommend that you first test the forex signals you are being sent in a demo account for at least a month or so. This will ensure you are dealing with signals that are profitable (and you can judge HOW profitable) and you will substantially reduce risk by doing so.