A Forex automated trading system is a software that will watch the market and make all the decisions for you, including trading. Most automated Forex trading systems on the market are EAs for MT4 (MetaTrader 4).
There are advantages in using them but there are also disadvantages. If you're thinking about purchasing one, I advise you to read both advantages and disadvantages carefully before you make your decision.
Forex automated trading systems advantages:
– The most obvious advantage is that the software work for you. You just need to install it and the software will analyze the market 24 hours a day and will also trade for you.
– Another big advantage is that you can easily do a backtest to see how the system performed in the past. You can see the trades that were made, the profits, the losses and even the maximum drawdown.
– Some of these automated trading systems allow you to redefine certain points. You take advantage of this, if that's the case of your automated system, by adjusting the risk / reward ratios, for example.
– A big advantage of these softwares is that they do not guide your trades by greed or fear – the traders' worst enemies. They simply analyze the market and trade.
– The price is also a great advantage. You can get automated trading systems usually for less than $ 100.
Forex automated trading systems disadvantages:
– As you already know, you can backtest the system to see how it performed in the last days, months or even years. Although, as they base their calculations on technical analysis, a great past performance may not equal a great present and future performance.
– If you're an experienced Forex trader or even a beginner, you most likely have noticed that when certain news are released, the volatility surges. As a software is different from a trader, it may not adapt to any kind of market as a trader can.
– The last big disadvantage of Forex automated trading systems is that you can become dependent of it. This may not sound like a disadvantage and it really is not when you're winning. If, by any chance, the automated system does not work anymore as it used to work, you will not know what to do to adapt yourself to the new market conditions.
The purpose of writing about Forex automated trading systems advantages and disadvantages was solely for you to know exactly what you can expect of it. If you're aware of both pros and cons, you'll be able to make a better decision.