The Forex robots have flooded the market owing to their efficiency and how easy they make the trading process. You can easily find a Forex robot these days, and while using them, you don’t need to take much stress, since they place trades according to a pre-programmed algorithm. Now, let’s look at the various mistakes you make while using them.
Not considering your trading objectives
Whether you are placing your trade manually or using a Forex robot, you should always have clear objectives in mind. The importance of having definite trading objectives is even more while working with a Forex robot since the trades will be placed according to these goals.
When your objectives are not clear, you tend to build a haphazard plan hoping you’ll get lucky. However, in the live Forex market, this rarely happens, and besides, you also have to take into account the fact that a trend can reverse anytime, leading to huge losses. Therefore, it is important to know when to make an entry and when to exit the trade.
Not checking the robot’s performance
Although there are several Forex robots available on the market today, not all of them will give you reliable performance. There are many fraudsters trying to sell Forex robots at high prices with manufactured trading results that show high profits. You shouldn’t fall into these traps and should check the performance of the system for yourself.
A good way to check the performance of a robot is to use historical data for backtesting. Although good backtesting performance does not necessarily indicate that a robot will perform well in the live market, it gives you an idea about the system’s profitability. Live trading results on an independently-verified trading account are the best way to judge a robot’s performance.
Relying only on the robot
Using Forex robots is an efficient way to place your trades, however, you should never rely solely on them. A lot of times, there will be some unpredictable event that will lead to the price of currency pairs fluctuating and this calls for manual intervention. It is unwise to let the robot trade as per its logic at all times when you are trading in a highly volatile market.
Therefore, you should possess sound technical knowledge that lets you assess the robot’s performance. If there is an unforeseen event, this lets you change the trading parameters accordingly, thus avoiding the ill-effects of market swing.
Not following the instructions
Every Forex robot comes with its own set of instructions and default settings. The instructions tell you how to use the robot in the best possible way and if you don’t follow them, the consequences can be disastrous. For example, a certain robot might be suitable for trading in certain currencies and if you try trading in other currencies, you might not get the same level of performance.
For best results, you should not change the default lot size and risk settings, unless you have a vast amount of technical knowledge. Remember, some robots are optimized to trade in certain pairs with pre-programmed risk settings, and you are better off not manipulating them.
Not reading the reviews
Like with every product, customer reviews are an important aspect of a Forex robot. Not only do they tell you about the performance of the robot, but you also get to know about other things like the quality of support provided. It is wise not to invest in a Forex robot unless there are several customer reviews available for you to go through.
When a system has overwhelmingly positive reviews, you know you can trust it. On the other hand, a Forex robot with no reviews is likely to be a scam or a new system with no track record.
Withdrawing during a drawdown
Withdrawing during a drawdown is a mistake many Forex traders make while working with automated systems or robots. But, the professionals do not behave in this manner. The maximum historical drawdown is 50%, and when the drawdown is high, you should invest additional money and after you make gains, a part of the money can be pulled.
By trading in this manner, you can turn the drawdowns to your advantage. And, by withdrawing during a drawdown, you stand the chance of missing out on profits.
Trading without any knowledge of the strategy
Although your Forex robot might have an in-built strategy using which it will place the trades, you should gain some knowledge about it. When you have no idea what strategy the robot is using, you don’t know when a manual intervention might be needed.
It is common knowledge that the Forex market is highly unpredictable, and this is true especially for exotic currency pairs. Thus, you need to know how the trading strategy works, so you can make adjustments whenever needed.
Choosing the wrong broker
Choosing the wrong broker can spell doom for you, no matter how efficient your Forex robot might be. A dishonest broker can charge you excessive commissions and you may suffer from losses in the long term. If you are a novice trader, you need to be extra-careful, since there are brokers who can try to mislead you by providing the wrong information.
Dishonest brokers might not be available to answer your queries all the time, whereas reputable brokers always provide customer support on a 24*7 basis. Hence, you should always work with an experienced and licensed broker.
Summing up
Now that you know about the various mistakes you can make while trading with Forex robots, you should make a conscious effort to avoid them at all costs. Only when used in the right way, can Forex robots drastically improve your trading experience and let you earn huge gains consistently.