Pros and Cons of using robots in Forex Trading: A guide for all South African traders

By Chime Amara

Meaning of Robots in Forex Trading

Robots are automated trading software applications designed to open and close trades on behalf of the trader. They are usually built following a tested and efficient trading strategy used by expert traders over the years which has made them consistent profits. Hence, they are called expert advisors (EA) as they take decisions on behalf of the trader. Most of the Robots used today are built on the MT4 using the MQL scripting language to mimic unique price action causing the robots to open and close trades at strategic points using increasing lotsizes or any other formula set by the programmer.

Pros of using a Robot

· Makes trading Easy for beginners: The use of Robots in forex reduces trading to ABC. Here a beginner can begin trading without any knowledge of how the forex market works by employing an expert advisor (EA) who guides him/her in taking decisions and often executes those decisions on his behalf.

· Helps to mimic the experts: Robots are designed to copy the strategy of professional traders which have been back-tested over time and proved profitable. Hence, using a Robot makes it possible for the trader to earn the same profits as the experts whose trading strategy he has installed on his account also.

· Can be connected to multiple devices: A particular Robot can be connected to multiple trading accounts to run at the same time using the same strategy. The only thing that may vary is the choice of financial instruments or trading pairs which has been selected for the robot to trade on a selected account.

· Designed to trade uninterruptedly: Another major advantage of trading with a Robot is the advantage of having uninterrupted 24 hours trading. The Robot is not like human beings and hardly gets tired nor expires. Its function is never affected by a poor network or one's location. Thus, the Robot continues trading even if one's PC used in installing it is switched off for days.

· Suitable for Investors: The Robot requires large capital and is therefore suitable for investors who have enough money at their disposal for trading, but do not have the time to do so themselves.

· Removes the stress and anxiety that comes with trading: Very often, trading the forex market comes with a lot of stress and tensions. However, the use of Robots helps to reduce these tensions and anxiety as the Robot now takes charge of these emotional outbursts. Robots have no fluid body and do not become emotional while trading.

Cons of Using a Robot

· It is difficult to find a profitable robot today: There are lots of fake dealers claiming to offer an excellent Robot for trading which is hardly the case once installed. It is not surprising that some forex traders have lost their investments by using fake Robots.

· Some Robots are not resilient to adapt to changing market conditions: Often the Robot is programmed to follow a particular trading strategy and is not able to adapt to changing market conditions in cases where the market reverses its trend, and moves so deep in one direction. In such cases, traders with low often lost their investments when the negative trades equal their capital.

· Not suitable for one with a very low capital: Trading with Robots requires large capital to withstand the market volatility and is not recommended for those with small capital below $10,000.

· Some Robots could be very expensive: The price of purchasing a good Robot today is could be very high, hence not everyone can easily buy a Robot today.

· Users will have to pay a monthly fee for a VPS: Similarly, using a Robot requires a Virtual Private Server to link it up with the network of the service provider. Often one would be required to pay for the VPS monthly or annually.

· Increases unemployment rate: There is an argument today that the use of Robots replaces human labor and thereby increases the rate of unemployment. This is based on the assumption that trading activities that would have been assigned to hedge fund managers are now given to Robots to do.