Forex Robots: The Great Debate: To Automate or Not Automate your Forex Trading

Are you one of the fans of automated forex robot trading programs? There is a strong likelihood that you are because automation is always attractive no matter in which way you see it. Automation makes you believe that since the human element is absent you get the best service and can also be sure of transparency.

The problem with automated trading or the so-called robot trading is that it does not work the way you think it does. All that talk of doubling your money in a week’s time is hype and based on historical trading. The fact is that most Forex traders who use Forex robots LOSE MONEY. The simple reason is that Robots have disproportionate RISK MANAGEMENT rules fed into them.

Robots let you make small profits - 3pips, 7 pips or 9 pips simply to boost the winning percentage. You will hear of 80-90% winning trades without any mention of the amount of money made. BUT their stop losses are out of sync with the reward to risk ratio. A typical reward to risk of 1:10 means that you are putting up $10 to win $1. In gambling this is known as sucker’s betting’ and no prizes for guessing who the sucker is in this case.

What actually transpires is that the number of winning trades is high but the profits that you make in them are miniscule. The stop losses set by the FX Robots are so wide that one losing trade can erase all the profits that you make on 85% winning trades. The number of winning trades is high but the amount you lose in the losing trades is higher.

Reward to risk ratio is inversely proportionate to winning percentage. When you are lured by the high winning percentage numbers you are exposing yourself to a lower reward to risk ratio. If Robot trading has a winning percentage of 90%, the reward to risk ratio is 1:10.

Winning percentages are figures that do not convey the exact picture and the system of Forex Robot trading platforms. Your primary focus as a Forex trader should be to always keep track of the risk involved and manage it.

Watch these video risk tips to know the radical concept of risk management and how to keep the reward to risk ratio in your favor:

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