Automated Forex Trading System - 4 Reasons You are Likely to Lose With Them
Automated Forex robots are a popular choice for many traders but in the vast majority of cases you will get wiped out and quickly for 4 reasons...Logic should of course tell you in life that you cannot buy a financial income for life for $100.00 - if of course you could, the whole world would be trading and not working and this hasn't happened yet or ever will.
Secondly, if Forex Robots made as much money as they claimed, they wouldn't cost $100, they would cost several million and banks and find management groups would use them and of course, they don't. Why? Because they know the promise of profits is not going to be delivered. Here are the reasons you are odds on to lose with an automated Forex trading system.
1. Track Records are Back Tested
They claim big profits but what do you get a simulated track record done knowing the closing data!
So the track record of profits is little more than a paper exercise where the system has been tested backwards on paper. Now this can work - but in the case of most Forex Robots it won't, due to the extreme bending of the rules to fit the data - lets look at this in more detail.
2. Track Records are Curve Fitted
The vendor has a segment of data and then bends his rules to fit the data segment. Now of course, no two periods of data of a week are ever exactly the same and when the system trades for real it breaks and equity gets wiped out. This is called curve fitting and will never work in Forex.
Vendors simply keep bending the rules until they get a profit but they then end up with...
3. Poor Money Management
When most automated Forex trading systems bend the data, they cannot have robust money management and take more risk when building the simulated track record, than any trader would do in the real world, not knowing what will happen next.
Money management is the ultimate key to success and most sold systems have money management that simply is illogical or non existent.
4. Starting Capital to Low
The other point which always amuses me is when a vendor claims you can run a system on $100 or $500 well even on a good system, you are going to have drawdown periods and this means you need staying power and you won't get much on a few hundred dollars.
There are automated Forex trading systems that win but most that are worth using have real track records and are not curve fitted. There is a great free one called the 4 Week Rule which will beat the vast majority of the sold ones promoted heavily online. Look it up in our other articles and you will see why it wins, its not curve fitted and has made real money for over 25 years.
Winning at Forex
Be very careful of buying any Forex trading system which has an outstanding track record in hindsight because its unlikely it will win in real time due to the reasons given above.