You may have found yourself landing on a very convincing sales page recently for any one of the many automated Forex trading systems out there on the internet these days. Often referred to as ‘expert advisors’ or ‘trading robots’ when they are applied to the MetaTrader 4 trading platform, these trading robots are extremely marketable because of the pipe dream they give people.
The pipe dream of the fully automated expert advisor / trading robot system, goes something like this: “If you buy our system, you will be able to put your trading on autopilot and watch the profits build up in your trading account, nothing is required of you except buying and installing this amazing piece of software into your trading platform”.
Sounds (too) good right? On the surface, of course this type of thing sounds good and as a result, of course it’s easy to sell to unsuspecting newbies in the Forex market. However, as we will discuss in today’s lesson, a little savvy research on your part and a sceptical approach to these robotic trading systems will turnover a whole host of ugly problems that should make you RUN, not walk away from them….
What is an Expert Advisor or trading ‘robot’?
Expert Advisors are programs that allow automation of the analytical and trading processes in the MetaTrader platform. They typically do this via you buying and then downloading a file onto your computer and then installing it into your MetaTrader 4 trading platform as a plugin / add on.
After this, the ‘magic’ (supposedly) happens; the software will determine when to buy and sell various currency pairs (usually you have to only use the pair or pairs suggested by the software seller), it will also typically include a risk management script of some type.
The main attraction here is that there is little to no need for you to do much of anything other than install the software. You can even set the number of lots to be traded, although you can typically over-ride this input, so that essentially eliminates a lot of that “no human emotional errors” advantage that these systems try to sell you on.
In short, trading robots and expert advisors promise to fully automate the trading process with the main marketing attraction being that the human emotion and thus human errors are removed from the process, or so they claim. However, as we alluded to earlier, this is little more than a pipe dream when you dig down into the surface a little further…
Why you should stop falling for robotic trading systems that ‘look’ amazing…
Unfortunately, in the world of Forex trading systems and strategies, there are all sorts of people looking to sell you very expensive trading systems via very convincing sales pages that look and sound very professional. However, if you dig into them a little bit (literally any of them) and do some research, you will quickly find the systems are unsustainable and they are just showing you an ‘ideal’ looking track record over a fixed period of time. It’s also possible to make fake track records that look ‘real’, so take any ‘track record’ you see advertised as ‘proof of performance / results’, with a grain of salt.
These system-sellers (notice I didn’t say ‘traders’ because real traders wouldn’t sell these things) aren’t typically explaining to you that you will need very large stop losses on many of these robot expert advisor trading systems, so large that one losing trade will wipe out of much of your account.
When market conditions switch from favourable for the system’s rules to unfavourable (typically trending to non-trending), the system will result in losing trades, and as market conditions are never fully predictable, the only way to truly adapt to changing market conditions effectively, is with the discretionary capability of the human mind trading from the natural price action of the market.
Not only will you lose money on the cost of buying these robotic trading systems (many are $800 or more), once the system fails you, you will probably lose any profits you’ve made. Not only will you lose profits, you will have learned absolutely nothing about trading or how to read a chart’s price action, so you will be left in a frustrated and angry / desperate state of mind which will probably cause you to lose even more money in the market via over-trading / gambling.
Don’t be fooled by the modern day snake oil salesman approach to trading the Forex market; there’s no easy way to make money as a trader, and indeed I might be one of the few trading educators who will tell you that, but it’s the truth. The ‘easiest’ way to make money is by learning a sound and logical trading method that is either purely or mostly dependent on reading the price action in the market, proper trading psychology and proper money management practices. This basic formula has worked since the days of Munehisa Homma; one of the first price action traders, and through proper training and screen time, it can still work today.
Don’t underestimate the power of the discerning human mind
All you need to do is look back at the greatest traders of our time and of generations past. Were they fully dependent on automated trading systems? No. Sure, they may use some type of trading software, but behind any outstanding trading performance is a human being, more importantly to my point, a human mind.
The traders and investors interviewed in the market wizards books largely had a discretionary and discerning approach to the markets. In other words, when you boil it all down, they were making judgement calls in the market, and very good ones at that. They were not using ‘expert advisors’ or automated trading systems, and for good reasons.
The only way any computer program will ever be able to compete with the potential of the human mind in trading, is if (when) we develop true A.I. or artificial intelligence, which by most accounts is quite a ways off. Until then, your best bet is to rely on the best ‘computer’ of them all to make your trading decisions; the one between your shoulders. Your mind is your biggest and most powerful weapon in the market, make sure you develop it properly by getting a solid trading education that will help you build yourself into a skilled and successful price action trader.