Never completely trust a robot?

The other day I came across an article with the above title. After reading it I thought that, beside the catchy title, what was really the appeal of the question?

I think it harks back to the deep set fear we have, that automation may be our ultimate doom - a la I-Robot or the Terminator.
I think it needs to be said loud and clear - "You are your Forex account's biggest enemy."
Compared to what the average greedy Forex trader is capable of in just "one adrenaline - caffeine induced trading rush" - even the most grave programming error of an expert advisor is a walk in the park.
I give you a real example of just last week: We had a client who was happy with the overall trading performance of one of the robots we developed, but had a couple of loss entries that he didn't understand. He wanted some clarification and sent us his account history. I don't know if you can imagine our bewilderment when we realized that this fellow had been trading at all the wrong hours. The robot's schedule was 180ª reversed - since he had not synched his account settings with his trading charts. Yet he had been writing up some beautiful profitable weeks!  We set him straight and the problem was solved with two clicks of a mouse, but - talk about trading without supervision.

I have said it before and will say it again - human emotions and human error caused by fear and greed are the number 1 enemy of you account.
If you have robot-trusting issues - this is what I recommend:

1. Do your research: buy a great forex robot from people who care and offer training and support. Make sure it has automatic money management controls and is specifically designed for the currencies you wish to trade.
2. Install your robot - check in once a day or once every other day to make sure it works fine - and let them do what they do best!

If you want more involvement read about our no trade days - but don't try to outguess the market it is a sure kiss of death for your accounts!
Other than that - trust your robots - they are not emotionally compromised...

The Best Scalping Strategies - Part 1 - EUR/CHF

Even the best scalping strategies will only work with a few currency pairs. Many currency pairs will never yield - try as hard as you may - to scalping - ever.

What is scalping really: according to Investopedia Forex Scalping is: "A Forex Trading Strategy that attempts to make many profits on small price changes. The main goal is to buy/sell a currency pair at the bid/ask price and then quickly sell it a few pips higher/lower for a small profit. Many small profits can easily compound into large gains if a strict exit strategy is used."

Of course scalping is much easier and safer with a currency pair that is range bound. A currency pair that is extremely volatile will cause too many wild fluctuations and cause too many stop losses.

The EUR/CHF Cross is one the best currencies for a forex scalping strategy.

Why does the EUR/CHF lend itself to scalping so well?

1. It is a tightly range bound currency pair.
2. The EUR/CHF is a currency cross - since it does not have the USD as part of its pairing. The main global currency fluctuations are in regards to the US Dollar, the world's "Reserve" currency.
3. Since both currencies share the same economic region they are strongly related and keep a tight equilibrium. It is really hard to think that the Swiss economy would prosper when the rest of Europe goes through an economic downturn and vice versa. This tight knit relationship leads to extra stability in this pair - something we really appreciate in a forex scalping strategy.
4. Interest rates are not very different between Switzerland and the Euro zone, also contributing to a tight range year in, year out. Even though the days of wild and uninhibited carry trade may be over, a big difference in interest rates in a currency pair creates an overall trend and enlarges daily, monthly and yearly ranges. The GBP/JPY, for example, is a wild ride on most trading days, while the EUR/CHF, in comparison, is almost sleep inducing.
5. The one thing that WILL move the Swiss Franc is geopolitical turmoil. More than any other currency the Swiss Franc is knows as a safe haven - or the gold currency. Most investors when fearing wild market swings will run to the Swiss Franc for cover. This currency was backed by gold to 40% at one time and between the Swiss neutrality and general status as a beacon of fiscal prudence this is where people will turn at times of instability and fear.

The EUR/CHF has been a reliable profit maker with our forex expert advisor scalping programs. The losses are very rare, the gains are steady and reliable, as maybe only the Swiss can produce?

This should be a permanent part of anybody's portfolio of automated trading strategies .

Improper Money Management - the reason most forex traders fail!

Forex Money Management is at the heart of any successful investment enterprise. If you ask any Forex expert about what makes a successful Forex Strategy and "Money Management" does not come up in his first three points  I would say that person is probably not an expert and his advise may not be worth listening to.
Money Management is what separates the professional trading approach from the amateur and not coincidentally is the very reason 90% of first time traders wipe out their first trading account.

Why is Money Management so detrimental? It means you have to abandon hunches at all times, be aware what your stop losses would do to your account, you HAVE to take losses and cannot afford to extend stop losses to avoid them and lots more somewhat unpleasant but responsible trading behaviors. Money Management is your constant reality check and most people would rather day dream while day trading.

Why is money management so important for long term trading success?


Amount of Equity                         Amount of Return Necessary to Restore
       Lost

         25%                                               33%
         50%                                             100%
         75%                                             400%
         90%                                            1,000%

So, that means that a trader would have to have a 100% return on his money just to recoup a 50% wipe out of his account.
Very few active traders are able to pull this off - I am sure that these traders use wise money management in the first place!

Stop hoping for the big one - the one trade that will make you rich! It doesn't exist - and while trying you will expose your capital to enormous losses that will be ever harder to overcome.

Start thinking in terms of steady growth with predetermined risk. Put your account on autopilot with good days that are realistic and bad days that are not catastrophic.

They only way to accomplish this is Forex automated trading with automatic money management.

Forex as a Retirement Investment?

Forex is usually not the first thing that comes to mind when the topic "Retirement Planning" comes up. Why? Because Forex still has the stigma of "no-holds gambling away - crazy trading" with risk that is uncontrollable and a chance to lose all the money at any moment. But is this perception deserved and even true?

I think we are still in what will be considered "Forex infancy" in years to come. Let's not forget that stock investing was considered risky and not a safe choice by those promoting real estate as the only safe investment choice just a few decades ago.
Trading always is only as good as the strategy behind it. There will always be traders who trade "by the seat of their pants" - in Forex right now they are still the majority - but soon they will be weeded out by the natural selection of trading - they will simply run out of funds.

When you have a sound Forex trading strategy and a system to implement it - preferably an automated Forex trading system to rule out human error and emotion - profits will follow - in all trading setups - Forex just being another investment venue. The advantage that Forex has over other investments is leverage - you can with little money  control large capital - that leads to faster paced growth but does not mean we have to deal with larger risk.

How to control risk in Forex:

1. You leave trading to a Forex automated system - no mistakes - 100% execution of your Forex trading strategy
2. You use a robot with automated money management and you trade with low risk. Your account will grow slowly and steadily - and on its own
3. You apply common sense - you avoid insanely risky days  - no-trade days - you read the news and observe the market behavior - ideally your robot uses volatlity filters to rule out much of the insanity on its own.

How to recognize the Best FOREX EA

First off I know there are many people out there who say that a "best forex robot" is like a contradiction in terms. Their opinion is that all Forex Robots are garbage. They are of course entitled to that opinon but I would question their wisdom, being a long term trader myself, if they truly believe there is safety in manual trading.
A Forex EA or Forex Robot - the terms are interchangeable - is nothing more than a software program based on a Forex trading strategy. Now, of course the program will only be as good as the strategy behind it, and there are a lot of questionable EAs out there.

How can you tell a great forex robot from a bad one? Here are a couple of pointers:

1. Is the software creator confident enough to offer you a money back guarantee? - a profit guarantee of course is even better.
   Whereas it is a general good business practice to offer a money back guarantee - in Forex trading this is particularly important.
   You want to make sure the company stands behind their robots and will not only offer you great customer service but also help you in set-up and can knowledgeably answer any questions you have. Of course if the company offers a profit guarantee - that really would be awesome.
2. The EA is customized to no more than two or three currencies.
   Each forex currency pair has its own distinct personalities. That has to be accounted for to create a good Forex strategy. I dare you to show me an EA that can trade the GBP/JPY and the EUR/CHF with the same presets! It is simply impossible! Doesn't exist. So, you can group some currencies as scalping currencies together and trade them in a similar fashion - but if the robot promises to work on ALL currencies in all market conditions run for the hills.
3. The software company offers different robots for different strategies - and they have created more than one robot.
   This goes hand in hand with the previous point. Each type of currency and each market - London, New York, Asia - requires careful tweaking in strategy. A do-all approach will lead only to losses. Your EA creator no doubt has to have different solutions for different markets. Also, be aware of EA creators who seem to offer too many robots. If they have found a strategy that works, why would they go on creating so many different robots? You are looking for a software company that created a handful of EAs and took years to develop them with real-time testing on live accounts and back testing over several years as well.
4. Your EA developer can answer questions - and offers customer support.
   In case you need assistance you need to be able to get in touch with your EA developer. Especially if you are a FOREX beginner - questions will come up and should be answered with real trading knowledge.  You want "real" traders with real experience behind the development of your product - not just some software geeks, who churned out a quasi system they have never traded on a live account.
5. Price is not a indication of quality.
   Unfortunately that is very true in the Forex world. Just because a Forex Robot is expensive is does NOT mean that it will trade better. I have seen some real hack-jobs in my time. Be very careful if the software company tells you outright that there are no returns. Like I said in my first point: a real company stands behind their product.  I for one believe it is important to offer a robot at a decent price and leave enough money in your pocket so that you can actually set up an account and trade well.
6. Be careful with exaggerated promises of "1000% returns", "Doubles your money in one month" "Never a losing trade"and other stupid quotes.
    A real Forex trader - who should be the person behind developing your Forex robot and therefore your Forex strategy - should know that the growth of your account is relatively slow and steady. I said "relatively" slow because compared to other forms of investment it is actually at breakneck speed - but it should not involve risking too much of your margin and put you at the constant danger of wiping out your entire account. Let's get real here - 1000% profit IS ridiculous and CANNOT be guaranteed - however 200% over a year is more than any other investment can offer you and sounds a lot more reasonable and therefore interesting. Look for robots that offer a believable return and do not promise things that seem too good to be true - because they usually ARE!

Happy Trading!

Stanley

Man Versus Machine: The Advantages of Automatic Trading

As a long time trader I was skeptical regarding the idea of Automatic Trading when it was first implemented in a large scale in the 90ies. After all did it not in some way threaten the very existence of my profession?
What a long way we have come!
Automatic Trading is not only here to stay, but it has really revolutionized the way we trade.
The advantages of trading robots are of course obvious.

• No Emotions
• Fast execution - no hesitations
• No "variations" on the strategy
• flexibility

Whereas the first three points are clear to all who have ever witnessed a "Forex Robot" or "Expert Advisor" trade a live account the last point seems some what arbitrary.

All decent Forex automatic trading systems employ filters to choose entries and exits - they are after all what differentiates one system from the other.

In a sophisticated robot you can control these filters and adjust them to what is going on this year, month or the last 24 hours - with as much involvement as you see fit.

The trader of today spends most of his day tweaking and expanding strategy - not really having to worry about execution of trades.

We have all become statisticians and been able to develop the most sophisticated strategies yet.

What we gave up was a sort of renegade cowboy feel that came with so much stress it certainly shortened our lives.

I think it was an excellent trade!