December 18, 2008
Automated Forex System Trading – Profits On Auto-Pilot
Automated Forex system trading has received a lot of attention lately as a great way to make money working from home. These Forex packages, or robots, can make trades automatically which can free up your time and make you a good amount of money. I test and evaluate this type of software because I trade Forex for a living. If I find one that makes profitable trades consistently, I keep it. Otherwise, I send it back to the vendor and get a refund. It is important to find Forex software that can make winning trades even through the toughest of economic conditions.
If you want to be successful and make money in automated Forex system trading, here are the top 3 things you should look for when evaluating this type of software:
1) How Does The Software Perform On Historical Back-tests?
Automated Forex trading software integrates with trading platforms like MetaTrader 4. Historical testing can be performed to simulate the trades and decisions the Forex software would have made against historical foreign currency exchange data. This can be a reliable indicator as to how the software might make trades in a live account.
When analyzing historical back-test results, an important statistic to look for is the win-loss ratio. The win-loss ratio is an indicator of how many times a winning trade is made in direct proportion to the number of losing trades. As an example, if the automated Forex software made 10 trades, with 4 winners and 6 losers, the win to loss ratio would be four to six. Thus, against historical data, the software made 40% winning trades .
2) What Is The Performance Of The Software On Forward Tests?
Forward test performance is even more important than back-test performance. In current market conditions, does the software perform well and make profitable trades? If the Forex software does not perform well under live trading conditions, back-test results are generally meaningless.
Most Forex trading brokers will offer demo accounts that let you make live trades without risking any real money. Due to the inherent risk of trading foreign currency, it is highly recommended that someone new to Forex trading use a demo account for the first few months to see the automated Forex system trading win loss ratio. Ideally, you want the Forex software to match or outperform the back-test results when trading on a live account.
3) Automated Risk Scaling
When evaluating automated Forex system trading software, possibly the most important factor to look for is automated risk scaling. Profitable Forex trading software should have built-in risk filters and indicators to help prevent the software from trading in risky conditions. During unstable market periods, this will help minimize the number of automated trades made by the Forex software and reduce losing trades.
Filed under Finance by