Nowadays, the forex market has gained a lot of popularity among the general public. People from the financial markets have been attracted to the forex market with different goals. Among these people, some have thought of developing trading algorithms in order to take the exchanges out of the traditional mode and to proceed systematically. This thought was the first start for trading bots in the forex market. In this article, we are going to explain to you 2 Reasons Why You Shouldn’t Use Forex Trading Bots. If you want to buy Forex VPS server, you can visit the packages available on Eldernode.
Table of Contents
Why You Shouldn’t Use Forex Trading Bots?
What is Forex Trading Bots?
Before we talk about the reasons for not using trader bots, you need to know what is a forex bot? A bot is nothing less than a few lines of code with clear marketing entry and exit rules that execute automatically. All that applies in the forex market is simply an automated strategy that buys and sells in the currency market.
Now we know what Forex bots are and how they work. But can you make money with trading bots or are they a scam? The performance or results of these automated strategies will depend on previous strategies and their monitoring; Therefore, if they are not profitable from the beginning, no matter how automated they are, they will not be able to. But if the planned strategy is good, the result may be better.
False Beliefs about Trading Bots
The trading bot has advantages that encourage the financial and capital markets to use them. bots can monitor the market without getting tired or sentimental. They can identify the right time to open and close transactions every day, every hour, and every moment and act on it.
Trading bots are used all over the world and in financial markets. The reason for this is the many advantages that these bots have. But sometimes these advantages cause people to have incorrect mental assumptions about trader bots and get unfavorable results.
There are many misconceptions about bots that prevent people from getting the desired output from the bots they buy or build. In the rest of this article, we will mention 5 of these false beliefs.
1. The Trading Bot is Smart!
A trading bot is a piece of code that decides to open and close trades according to the conditions defined for it. The bot may make these decisions based on very simple conditions. For example, if he makes a purchase half an hour after the start of trading in the market, if the price increases, or he closes the transaction 2 hours after each purchase, regardless of the profit or loss. This bot is not smart! A buy trading position is entered only if a simple condition is established.
2. The Trading Bot is Profitable!
Profitability is not an inherent property of trading bots! A trading bot can be profitable or unprofitable. The profitability of a trading bot depends on the conditions and, in other words, the trading strategy on which the bot trades. If the trading strategy is not designed and tested in principle, practically no reliance can be placed on this trading bot. A trading bot, if not based on a proper trading strategy, can quickly (and even while you sleep) wipe your account to zero or seriously damage it.
3. The Trading Bot continues its Past Performance!
The first thing to do when choosing a trading bot is to check its past performance. Many people, after seeing a bullish chart with a good net profit, buy a trading bot and directly use it to trade on a real account. The fact is that the mere profitability of a strategy in the past cannot be a suitable criterion for drawing conclusions regarding the profitability of that strategy in the future.
4. A Trading Bot works Better than a Human!
This statement is not necessarily true. In many cases, trading bots can outperform humans. A bot’s mathematical calculations are faster and more accurate than those of a human, except in the case of being written incorrectly. A trading bot, unlike a human, does not get caught up in emotions. The trading bot does not get tired of checking the market full time and does not lose its focus. These are correct. But all these things depend on the fact that the programming of the trading bot is done correctly.
A trader, if he sees his account tending towards zero with an abnormal trend, he will probably stop trading and start checking his performance. But if the bot does not have a mechanism to monitor its performance, it can continue to take losing positions until the account is zero. There are many such examples. As mentioned above, in most cases, bots are not intelligent and do not understand what they are doing.
Reasons Why You Shouldn’t Use Forex Trading Bots
Although the advantages of Forex bots are obvious, these bots also have disadvantages. Most of the robots that are marketed on the Internet are built on the grid and martingale trading system, which shows very good results and an almost perfect performance curve, but one day they break. Why? Because of the aggressive risk management rules they use. If you don’t think so, download some of them for free and look at the results over time. In the rest of this article, we will discuss two reasons why you shouldn’t use Forex Trading Bots.
1) Forex Trading Bot is Still Dependent on Humans!
As we said, these bots are able to execute strategies flawlessly. But if there is a mistake in the strategy, the bot is not able to correct it. So there is still dependence on humans. Also, it is not possible to operate in the market only by using a trading bot. The limitations that exist in the use of tools related to technical analysis make bots ineffective in some situations. Again, it comes down to human intelligence and understanding. Because in some situations and markets, human understanding must come into play to be able to draw conclusions.
On the other hand, since the bot is the only operator of fixed orders and does not have the ability to recognize, it cannot make a decision at the moment and this may lead to many losses. All these issues ultimately lead to wrong beliefs about the forex bot, which sometimes leads to traders’ incorrect use of these tools.
2. Inability to Understand Logic
Most of these systems are only successful for a limited period of time. As market conditions evolve, trading rules that were valid in the past tend to become obsolete. Without revalidation at regular intervals, Forex bots can become completely ineffective in a short period of time. Also, markets are a dynamic atmosphere. In times of changing principles, forex bots cannot adapt to changing conditions. In times of increasing or decreasing volatility, the existing trading rules become ineffective and Forex trading becomes more negative and unprofitable.
There may be hundreds of forex trading bots on the market. Special technology is used in making these bots. This bot has provided a safe and highly efficient platform for traders. These robots have preset settings and make transactions for people with just a few simple clicks. For people or experienced traders, the settings of the bots will be more flexible. Each bot may have a different trading style. Anyway, to prepare the bot, you should refer to the items mentioned in the above text. In this article, we tried to explain Reasons Why You Shouldn’t Use Forex Trading Bots.