Friday, 20 January 2012

Automated Forex Trading - A Good Way For The Inexperienced Trader To Profit?

If you are still fairly new to the world of Forex, you may have heard that automated Forex trading is a good way for someone with limited experience of the market to start making money from the start. The prospect of being able to turn a profit from trading Forex without having to learn the business yourself is obviously a tempting proposal, and the result has been a range of products offering this pot of gold appearing on the market.

How Does Automated Forex Trading Work?

Automated Forex trading involves the use of a computer program in conjunction with your trading account, these programs are commonly referred to as Expert Advisers (EA's) and Trading Robots. They are designed to be compatible with the latest trading platforms, such as MetaTrader 4, and work by actually taking control of the trading activities of your account. There are generally settings which you can alter that determine the aggressiveness of the trades the EA will enter, but other than that the software has complete control over which positions you enter, your Stop Loss and your Take Profit levels.

Can You Actually Make Any Profit From Automated Forex Trading?

A quick search on the internet for any of the major EA's will usually return a slew of positive reviews of the product, along with a prompt to then go and buy said EA. Most of these reviews should be taken with a pinch of salt, as more often than not they are written by marketers looking to earn a commission from the vendor of the EA by sending you, their prospect, to the vendors website with a glowing appraisal of the product. The EA vendors own websites are also often not entirely believable also, with the quoted profits their software makes rarely replicated when actually put to the test.

That said, the more well established automated Forex trading programs do remain popular, and that itself suggests their may be benefits to using them. In the Forex community opinions about EA's remain divided, although it is fair to say that those who have taken the time to learn the business of Forex trading view them with some disdain, while newcomers see them as a short-cut to making money from Forex.

Are There Any Drawbacks To Using EA's?

The first drawback that I think would spring to anyone's mind is that you are giving up control of your trading balance to a computer program. It's true that you can use them on a demo account, but if your target is to start making money from the get go then this defeats the object somewhat.

Many brokers do not approve of the use of EA's, and while this may suggest that automated Forex trading must have something to it if it has the brokers on alert, it also poses problems. Brokers have been reported to take steps to prevent the use of robots on their accounts, such as blocking a trade from being placed when they detect an EA is present. If your brokers' Terms Of Service specifically forbid the use of any such software, your trading account will likely be banned.

Whilst some people have reported seeing profitable trades using EA's, the reality is often that these winning trades are too few and far between to enable a person to make a full-time income this way. As I mentioned at the beginning of this article, automated Forex trading may be appealing to someone still fairly new to trading. For anyone who has a good amount of experience in the Forex market, Expert Advisers are little more than a piece of useless software peddled by slick marketers looking to profit from peoples dreams of rising above the fold of failed Forex traders. This may or may not be a fair point of view, but there can be little argument to the fact that there is no substitute to learning the business of Forex trading from the inside out and being able to trade profitably and independently of any piece of software.

Are There Any Alternatives To EA's That Will Help New Traders To Profit?

Whilst relying on automated Forex trading systems may not be ideal, the fact they offer an opportunity to start making money right away is what makes them popular. The downside to this, even if the EA does make you money, is that you learn very little about Forex trading because you have absolutely no involvement in the trade. What happens if the EA stops being profitable, or your broker stops it from placing trades? You are left back at square one having gained no tools or knowledge with which to try manual trading.

A good alternative for many new traders is to subscribe to a service offering Forex trading signals.The Trading Method is one such service provider, owned and operated by actual human traders who provide members with consistently profitable signals that you, the trader, then place with your brokers. This not only allows someone with limited trading knowledge to start making a profit from trading, but because you yourself place and manage your trades you are also learning at the same time.


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