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Pros and Cons of Forex Trading with Robots Hey traders, Forex trading robots (EA) are commonly perceived as a sort of magic button. Once it is clicked, the system starts trading automagically, generating consistent profits. What can be better? However, many pitfalls are hidden behind its simplicity. In this educational article, we will discuss the advantages and disadvantages / pros and cons of trading with Expert Advisers (EA) / robots. Advantages of Forex Trading Robots Let's start with the positives ➕: 1. The first major advantage of EA is the fact that it works 24/7 , without delays and coffee breaks. Once it is launched, it will keep working till you stop it. 2. The second advantage of EA is that it is non-emotional and objective . It strictly follows the algorithm and rules determined by a program. It is not influenced by psychological biases, making each trade extremely precise. 3. The third strength of trading robots is the processing speed and its limitless scalability . EA can monitor dozens of trading instruments on multiple time frames simultaneously, not missing any bit of information. Hence, it requires less time for decision-making and trade execution. 4. The fourth advantage of EA is the simplicity of its backtesting . Once the algorithm is written and the order of execution rules are described, it can be quickly and easily tested on a historical data. Disadvantages of Forex Trading Robots So far, sounds like a panacea, right?! But now, let's discuss the negatives ➖: 1. Similar to any software, app or program, the EA is vulnerable to bugs, and may occasionally lag . Therefore, it requires a constant oversight and maintenance . In order to fix the bugs and maintain that, a high level of experience is required . One should have the advanced skills both in coding and in trading. 2. Moreover, admitting the fact that the market is constantly changing and evolving, one should regularly update the EA and adapt it. In comparison to humans, trading robots are not learning, they do not evolve, update themselves. 3. Leaving the robot without supervision, updates and patches, it may blow the entire account in a glimpse of an eye without any embarrassment. 4. One more important thing to add about EA, is the fact that it is technical analysis based . For now, there are no solutions on the market that would allow the integration of fundamentals in the algorithm. Unfortunately, most of the traders overestimate the strengths of trading robots, completely neglecting its obvious weaknesses. If you decide to apply EA in Forex trading, always consider its pros and cons that we discuss in the post.
OANDA:XAUUSDEducation
by VasilyTrader
1
Algorithmic Trading / Robo-TradingAlgorithmic Trading: Automating Financial Markets for Greater Efficiency and Profitability Explanation Algorithmic trading, also known as robo trading, is a process of using computer programs to execute trades automatically based on pre-defined rules or algorithms. It has revolutionized the way financial markets operate, making them more efficient, faster, and less prone to errors caused by human emotions. Advantages The advantages of algorithmic trading are numerous. Firstly, it enables traders to analyze vast amounts of data and execute trades with incredible speed and precision, resulting in improved profitability. It eliminates human error and bias, which are significant sources of trading losses. Secondly, algorithmic trading allows for 24/7 trading, regardless of the trader's location or time zone, which makes it possible to take advantage of global market movements. Finally, algorithmic trading also provides a level of transparency and accountability, as trades are executed automatically, and the outcomes are recorded in real-time. History The history of algorithmic trading dates back to the 1970s when the first computerized trading system was developed by the NYSE to automate the execution of large trades. The system was based on the principle of matching buyers and sellers electronically, and it soon became the norm for trading in the US equity markets. However, it was not until the 1990s that algorithmic trading began to gain traction in other financial markets. As computing power increased and access to market data improved, algorithmic trading systems became more sophisticated, enabling traders to execute trades with greater precision and accuracy. With the introduction of low-latency trading platforms in the 2000s, algorithmic trading became even faster and more efficient, allowing traders to take advantage of even the smallest market movements. Today, algorithmic trading is used in almost every financial market, including stocks, bonds, currencies, and commodities. It is estimated that more than 80% of all trades in the US equity markets are executed by algorithms, and the trend is growing in other financial markets worldwide. In conclusion, algorithmic trading has transformed the financial markets by improving their efficiency, speed, and profitability. It is a powerful tool for traders and investors, providing them with the ability to analyze vast amounts of data, execute trades with incredible speed and accuracy, and eliminate the emotional biases that often lead to trading losses. As technology continues to evolve, we can expect algorithmic trading to become even more sophisticated, providing traders with even greater opportunities to profit from the global financial markets.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
Trading With Robots (EA) | Your Pros & Cons 🤖 Hey traders, Trading robots are commonly perceived as a sort of magic button. Once it is clicked, the system starts trading automagically, generating consistent profits. What can be better? However, many pitfalls are hidden behind its simplicity. In this educational article, we will discuss the advantages and disadvantages of trading with Expert Advisers (EA) / robots. Let's start with the positives ➕: The first major advantage of EA is the fact that it works 24/7, without delays and coffee breaks. Once it is launched, it will keep working till you stop it. The second advantage of EA is that it is non-emotional and objective. It strictly follows the algorithm and rules determined by a program. It is not influenced by psychological biases, making each trade extremely precise. The third strength of trading robots is the processing speed and its limitless scalability. EA can monitor dozens of trading instruments on multiple time frames simultaneously, not missing any bit of information. Hence, it requires less time for decision-making and trade execution. The fourth advantage of EA is the simplicity of its backtesting. Once the algorithm is written and the order execution rules are described, they can be quickly and easily tested on a historical data. So far, sounds like a panacea, right?! But now, let's discuss the negatives ➖: Similar to any software, app or program, the EA is vulnerable to bugs, and may occasionally lag. Therefore, it requires a constant oversight and maintenance. In order to fix the bugs and maintain that, a high level of experience is required. One should have the advanced skills both in coding and in trading. Moreover, admitting the fact that the market is constantly changing and evolving, one should regularly update the EA and adapt it. In comparison to humans, trading robots are not learning, they do not evolve themselves. Leaving the robot without supervision, updates and patches, it may blow the entire account in a glimpse of an eye without any embarrassment. One more important thing to add about EA, is the fact that it is technical analysis based. For now, there are no solutions on the market that would allow the integration of fundamentals in the algorithm. Unfortunately, most of the traders overestimate the strengths of trading robots, completely neglecting its obvious weaknesses. If you decide to apply EA in trading, always consider its pros and cons that we discuss in the post. ❤️Please, support my work with like, thank you!❤️
FOREXCOM:XAUUSDEducation
by VasilyTrader
8
Advantages and disadvantages of trading robotsHello everyone Today I want to discuss Trading Robots with you. In trading, any trading method takes place, especially trading using a robot that is devoid of emotions and performs everything that is assigned to it with the accuracy of a tick. Robots have many pros and cons, let's figure everything out in order. Advantages Speed. Any program is able to monitor more tools than a person. In addition, the program easily performs dozens of calculations and can analyze the market and make a deal in a matter of seconds, which the human brain is simply unable to do. A trader cannot learn hundreds of strategies and rules and use them simultaneously in the market, trading manually. On the other hand, the program is able to safely use complex systems. Accuracy. If the code is written correctly, if the strategy is well chosen, the robot will follow the rules accurately. An ordinary trader can choose the wrong tool, mix up the numbers, put a comma in the wrong place, the robot is absolutely accurate in its actions. Fatigue and scalability. Any trader needs rest, no one is able to sit at the monitor and constantly trade correctly. Unlike a human, a robot just doesn't get tired. He is able to work all day, seven days a week and does not ask for time off. If you use a robot, you can be free all day and go about your business while the robot does all the work for you without fatigue. Functionality. If a person finds a new strategy, he will need time to study it. And even after spending time studying, there is no guarantee that a person will understand everything that he studied the first time. But the robot will be taught easily, it is enough to write a line of code, and it will do everything, without errors, from the first time and you can add as much as you want and almost anything. The robot is not subject to emotions. Perhaps the biggest problem of a trader is emotions. Every trader, especially a beginner, experienced strong emotions when he lost or when he earned. It will not be possible to correct your psychology and get rid of emotions in a second, but fortunately, the robot does not have such problems. The core of the robot is built on clear rules, the robot simply does not know how to deviate from them, and the robot does not know emotions. The robot doesn't care how many losing trades there were before or will be after, all it knows are the rules, and it adheres to them. It is not easy to create a robot, but everyone can do it if they put enough effort and spend time. Disadvantages The complexity of making a robot (writing a program). Everyone can create a profitable trading strategy, but not everyone knows how to program and create robots. If you can program, you may have to learn a new programming language. There is an opportunity to buy a ready-made robot or order a robot to be written to you. In the first case, you will not know what is hidden in the black box, you will not be able to configure it. In the second case, there is no guarantee that the programmer will understand your idea and do everything right. The trading robot can only use technical analysis. A trader can read the news and understand the meaning that is hidden between the lines. The trader knows how to understand, but the robot does not. The robot understands only dry figures and therefore it uses technical analysis perfectly, but is not able to go beyond these limits. In addition, there will be situations when you clearly see one scenario, and the robot simply does not see it. At the same time, it is impossible to stop trading the robot if it is profitable at a distance. The only thing that can be done is to analyze this situation and, if necessary, make changes to the algorithm, while carrying out the entire testing process anew. A trading robot cannot make decisions in non-standard situations. It only fulfills the logic inherent in it, and in case of problems it will not be able to change anything. Of course, the program can include the robot's reaction to some situations, but it is impossible to foresee everything. For example, if the Internet connection is lost, the robot will not be able to continue trading or at least close an open position. A trader trading manually, in this case, would call the broker and close the position, or restore the Internet. The computer may freeze, the program may close with an error, the broker may not accept the application or accept it, but with a long delay. The trading robot will not be able to react to all events and this may lead to unplanned losses. The lack of emotions, one of the advantages of a trading robot, is also a minus. The robot can drain your entire capital in one day without any embarrassment. This must be taken into account when creating a robot. For example, allow the robot to trade only a part of your capital, or make it so that when a certain threshold is reached, the robot notifies you and (or) stops trading. Conclusion Concluding the consideration of the pros and cons of using trading robots, I want to say that the negative sides can be largely offset by a professional approach to creating a robot whose algorithm will take into account actions in non-standard situations. But at the same time, of course, there is no escape from the complexity factor in the process of creating robots, this is the main deterrent, which can only be overcome by spending considerable time on mastering programming. Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻
Education
by Lingrid
11
Retail gamblers found the holy grail... To be a rogue trader!I just had a little look into "robots". I've known from reading some of the BIS reports that Forex quants mostly vanished after 2008. But I wanted to go on these FX retail sites that are heavy in the "automated" very short term "trading", which is not actually day trading as they run these programs 24/24 there is no "end of the day so let's stay out of the market for 2/3 of the time to compound profits faster" 😄 Here is how I expect an exchange with an "automated" day gambler would go: My day gambling strategy works muahahaha it does well on backtest for 1 years.   Me: "That's simply because the pair you tested it on has been trending for 1 year you numbskull" Well you just have to apply it in the right conditions!   Me: "With your crystal ball? If you know what they are, why not just manually take 1 trade?" Aha! Because of the power of compounding! Rather than risk 1% to make 5% I will make 2% 25 times.   Me: "Your brain on holiday? Forgot you would also compound spread costs and losses?" Well forget it, if you rly zoom in and can't see anything it looks magical! Doesn't depend on the 1 year trend!   Me: "Then it depends on the 1 month trend?" No! no matter what you say I have an idiotic answer! Usually starts with "You just have to"! I'll throw idiotic answers at you until you get bored and give up on me because I am hopeless!   Me: "Well done I give up" "Thanks for the laugh though" 😂 Take a good friend of mine, UDNCNY: I can tell you for a fact that an "automated strategy" of the kind I am going to describe would work. Don't even need to backtest it. The strategy is as follow: Take about any indicator (RSI, Bollinger Bands, etc). When the price goes down (< 30 RSI or lower band) then goes back up to the middle (RSI 50 or center of Bollingers) you sell. And of course the same on the opposite with buying. Yes that strategy would work, we can quickly eyeball it: In practice this is not even what they do. A risk-to-reward ratio as enormous as puny 1-to-1.8? That's like 1% of retail. Never! What they do is have super distant stops, or no stops. And quickly by looking at USDCNY you understand how they can win. Shorts at a loss are all in a pullback, and the price never goes very far, so by just waiting they will turn into winners at some point. In my example which wasn't the best part of the USDCNY trend, there are 6 short signals, and 3 longs. The longs that are not winners quickly, will "never" recover so they'll take a loss on a far away stop here. But some longs are winners, and most to all shorts are winners, the smaller the reward and bigger distance the stop is, the close to 100% winrate it gets on shorts. To sum up, with their ridiculous high winrate strategies applied in the right conditions: - The vast majority of trades are going to be winners no matter what - Maybe 1/3 of the losers are in the wrong direction and will be big bags - Maybe 2/3 of the "losers" are in the correct direction and eventually will recover These troll retail gamblers are zooming in a flower to the molecule level and wondering why it suddenly went invisible. Must be magic! They have no clue. There is an insect on the flower, that's why you can't see the flower molecule anymore you numbskull. This indicator strategy I mentioned works on a trend, how about a nice thick really gross sideways? Constantly stopped! But have no worries for the retail gamblers have a trick up their sleeve! With a very wide stop such as the risk is 20 times the size of the reward you will keep winning! Hurrah! Martingale! And then it will start trending in the wrong direction and the clowns will get wiped out. And I can assure you, this happens more often than 1 in 20 times 🙂 Now we are getting to my favorite part: The holy grail in the title. I went to myfxbook take a look at system. By default they show you only the ones with positive returns, and many of those are very recent. No no no no no. let me change that filter to at least 1 year of activity, and any returns. What's this? More than half show red returns? Oh my that's a lot of -99% 🙂 Most people quit before getting to -99. How about I pick one of the "winners"? Weird, why are their open trades private? Another one. Private. Another. Private. And another, private again! Oh I found one! TrumpBot. Interesting, that's a lot of red sir. 70 open trades, almost all in the red. USDCAD, EURUSD, USDJPY. All EURUSD are sells, and all the ones ones are buys. He took plenty of short term trades (well long term now as he's been holding the bag for a while) LONG on the USDOLLAR. Oh no! Remember USDCNH? Well these bags go back to early in the USD downtrend. He's been holding for nearly a year 🙂 L - O - S - E - R Just takes 1 L to wipe out these clowns. They can hack some site to make losses vanish, and obviously the dum dums that buy these kinds of systems are too lazy to really do their research so they never notice it, but if it's real money IT'S REALLY GONE. There are some guys that have been struggling to make money for 20 years and have sold robots for 10. Is it cruel if I... roll myself on the floor while I laugh to tears? 🤣 What about all these "private" systems? They're holding bags too? There is a name for this. It starts with an F. And ends with raud. It is the rogue traders specialty. They do a bit more (pros), call them "hedges", manipulate accounting for example, take opposite positions to cut their losses while keeping them secret (unrealized)... Here is a regulator release on famous Karen Bruton, known as "the supertrader". She was made famous by Tom Sosnoff that had her appear on his show. The SEC fined her and a partner to over a million dollar. She lost way more than that. No jail. www.sec.gov Tom Sosnoff is a market maker from the 80s that created a popular trading platform that he sold, and now teaches people to sell option spreads. With no edge or risk it will return little money, like 1%. Karen the Supertrader got superresults by leveraging that strat. Which causes it to LOSE money. Looks like Karen couldn't figure out high school level maths, nowadays this got to be 2nd uni year, the levels has collapsed it's amazing, my sister aiming for med school doesn't even HAVE math classes since 16 year old, science with no maths, genius government. "But kids don't like it", ye so let's make them even dumber than they already are! Yes but Karen convinced investors, and even Tom Sosnoff and his colleagues, that she made money! Ye, just like all the myfxbook trolls. She never closed the losers. Plenty of realized gains, and much larger unrealized losses. Pathetic. And the flip side? Warren Buffett has held unrealized gains on Coca-Cola since 1987. Never held losses very long. Ever. Some uni nerd looked at it. We know because he has to report all positions. Losers (and crooks) hold losers. Winners hold winners. That simple.
Education
by MrRenev
A filtered MACD strategy on the 1 hour chartA 1 hour chart strategy. Presented to you. When: - The price is above the 4 hours 100-EMA - The MACD & Signal(5) lines are below zero - The MACD (blue) crosses above the Signal (red) line We buy When: - The price is below the 4 hours 100-EMA - The MACD & Signal(5) lines are above zero - The MACD (blue) crosses below the Signal (red) line We sell To keep in mind: Specific to EURUSD (but it's almost the same thing with most major pairs that all have the same average true ranges): Stops are supposed to range from 15 to 40 points, with targets 30 to 80. The daily ATR ranging from 50 to 150 points. Anything below 30 pts target is starting to be too small and above 80 points it is too big we're not thinking intraday here. A quick backtest on EURUSD And that's already 21 trades for the EURUSD with a winrate of 52.4%, plus the title 5 setups that were a bit cherry picked I won't lie. I didn't even cherry pick them I got lucky on my first try (I thought I was continuing my backtest in July 2017 didn't realize it was on 2020) but I wouldn't expect an 80% winrate in general. EURUSD: 11 Wins. 10 Loss. 1:2 risk to reward. 52.4% winrate. Next is GBPUSD And here is another batch of 21 which is a good sample size. GBPUSD: 12 Wins. 9 Loss. 1:2 risk to reward. 57.1% winrate. It is important to zoom out (I know no one does it). A look at the daily chart. Just going to check quickly because it is getting boring. Should have taken the 5 minutes to make a script to filter this but I'm in too deep to go back now. And I just noticed I have been backtesting GBPUSD with the 200 EMA. Well nevermind, it is the same thing. Result wouldn't change much. And here I made the whole box. 12 Wins 19 Loss. Still a winrate of 38.7%. I can go for worse ones How about the recent EURUSD price action? 37.5% winrate If you think it gets immediatly better, here are the next ones: The findings: - When the conditions are good it won 55% of the time - When the conditions are average it won 38% of the time - When the conditions are bad (range plenty of false trends) it won 10% of the time With a RR of 2 the breakeven winrate is 33.33% But we have to include spreads. This strategy goes a bit further than "day trading" so stops and targets are quite wide. The typical stop/target is something like 25/50 (for EURUSD), the spread is 1 point. Other pairs of course are a bit more expensive. 50/25 = 2 49/26 = 1.88 breakeven winrate = 34.72% (10+38+55)/3 = 34.33% 🤔 ... Interesting coincidence... If the risk reward on average is of 1.88 and the winrate is 38% then the profit factor is 38*1.88/62 = 1.15 which is not very high but if the strategy takes a whole lot of small trades it is ok. The few cases I looked at prove nothing, this might have a blind winrate of 50%, 20%, or 33.33% (most likely). I don't know how to backtest with tools maybe I should learn so I can clic and let it execute for me... Stay tuned for a tutorial! :D You would have to execute this strategy when you think the price will trend. But not a very strong trend or there will never be a signal. An average or weak one, or something that contains trends, like what I have shown and backtested 3 times. So this means you'd still have to make a directional bet. There is no escape. Sorry no magic trick to avoid it. A directional bet on the price or on the volatility itself, the trends... Once you make your directional bet, what is the advantage of day trading with a macd strategy over just taking the trade and holding? The power of compounding. Here someone made a backtest on the daily chart for the S&P500, the strategy took 500 trades with a profit factor of 1.2 and returned 95%! Without counting any spread/commissions. And just holding the S&P during the same period returned 151%. Amazing. Then what is it that gets compounded with technical day trading? Easy. Losses & costs. Also causes to miss out when right about the direction. Lots of inconvenients, and no advantages. Sounds amazing. The power of COMPOUNDING™. Ye I'm not sold. There might be a tiny edge but it's just so worthless. Picking pennies... Got to imagine the amount of desperation to make any profit anyone would have to try that. And they'd probably end up losing. Why did I waste my time?
Education
by MrRenev
5