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Automated Forex Trading Systems - One Trader's Perspective

Updated on July 22, 2012

Automated forex trading systems are said to be the boon for the forex trader. All you need to do, as the advertisements tell you, is to set a few parameters, and then you leave it alone to make money for you.

But, advertisements aside, can an automated forex trading system really make money? Well, that is the question that I will attempt to address in this hub. Bear in mind that I have some years of trading experience in forex, stocks, commodity and index futures, but I have no experience in automated trading systems. But as I have some programming experience, I do know how such systems can be written and implemented.

Can an automated forex trading system make money?
Absolutely. Such trading systems bypass one of the main obstacles to making money for many traders, and that is emotion. These systems have no emotion, and no fear, and will simply execute a trade when they are supposed to.

In fact, if you can identify a trading system that can consistently make money, and can break it down simple rules that a piece of software can execute, you would probably do much better letting the software trade rather than trading the rules manually.

Can an automated forex trading system make money consistently?
This is the key question. Anybody, or any system, can make money. After all, there are only 2 options, buy or sell, and it is conceivable that a system can get lucky over a few trades, even if it is randomly entering and exiting trades.

Or it might have a trading technique that makes good money during certain phases of the market but loses miserably in other phrases. In this case, the trading system can actually make good money for a few months before losing all the money it has made and more.

The key is to be able to show a net profit through all the ups and downs of the market.

Many forex trading systems claim that they have backtested their system and it has shown to be profitable over the past couple of years.

Given any set of data, even random data, it is possible to come up with a set of rules to trade that data profitably. I won't put too much stock in that claim. Of course, the larger the number of markets that has been backtested profitably, the greater the possibility that the system might perform well.

If an automated forex trading system generates a net win, why do their owners prefer to do the difficult job of selling that system to the public, rather than trading it themselves?
Your guess is as good as mine. And my guess would be one of the following:

  • The owners know that it is a matter of time before the system breaks (the system cannot generate consistent profits), so rather trade the system, decides that there is more money to be made selling it.
  • The system was created with the sole intention of selling it. The rules of the system was fine tuned so that it is profitable on past data, but has little chance of being profitable in actual trading.

Automated forex trading systems are exactly what the name implies - automation of a system or strategy to trade the forex markets. The fact that it is automated does not, magically, make it profitable. What is more important is whether the base strategy or system is profitable. Automating a losing strategy will not make it profitable.

Many traders and investors look to automated systems as a short cut to wealth. As the advertisements would say, an automated forex trading system is a system that you can set and forget, while it effortlessly makes money for you day in and day out, even while you sleep. There definitely is such a system - in your dreams.

The forex market is arguably the largest market in the world. If you can find a way to trade it profitably, you can become insanely rich in a very short period of time. As a trader, your energies should be directed to finding ways of trading the market profitably, while as an investor who does not know much about forex, you should tread carefully before putting your money into any forex based investment or funds.


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    • wandererh profile image

      David Lim 6 years ago from Singapore

      True, although that's not confined to just automated trading. I have had many strategies in manual trading work extremely well for a period of time, only to eventually fail miserably. :(

    • Ruchi Urvashi profile image

      Ruchi Urvashi 6 years ago from Singapore

      Great information. Yes, automation helps to get rid off the emotions and it might work for some time until there is a new unique situation where automation stops working.

    • wandererh profile image

      David Lim 7 years ago from Singapore

      Forex News - If I may, 5 weeks might not exactly be enough to see if you can be profitable over the long term. But it is great that you are profitable. :)

    • profile image

      Forex News 7 years ago

      Good hub, nice to see some helpful info on Forex. I started Trading Forex about 4 months ago and it was really hard in the beginning! I finally started to profit from it in the past 5 weeks - but it wasn't easy.

    • wandererh profile image

      David Lim 7 years ago from Singapore

      If things go well, do write a hub about it. :)

    • profile image

      hubby7 7 years ago

      Well written hub. Very thoughtful. I just recently became interested in forex robots and am interested in experimenting with one with a money back guarantee. Again, good hub!

    • wandererh profile image

      David Lim 7 years ago from Singapore

      I totally agree. You should start with a winning strategy, and then find a way to automate it.

      An exception might be systems based on neural nets, in which the system's trading style will change as it learns and as the market changes. But that's another hub. :)

    • profile image

      trading systems 7 years ago

      very nice and arranged way of rendering the topic, thanks for making the info so easy to absorb. My opinion is automated systems would work best if you use a strategy that works and make it automated. For this you need to have a programmer working for u..or be a programmer yourself.. otherwise buy some software but i can't suggest one at the moment.

    • wandererh profile image

      David Lim 7 years ago from Singapore

      Thanks ngureco. I paid a lot of "tuition fees" in the past to come up with the logic. :)

    • ngureco profile image

      ngureco 7 years ago

      This is a good hub, and with a lot of logical reasoning. Thank you.