Why does automated forex trading not produce millionaire traders?
There is no point in discussing the advantages of using Expert Advisors in trading. This topic is discussed day by day, pouring over all advantages of automated trading from one article to another - "a soldier asleep while the soldier is away", there is no need to sit at the computer, there is no need to read the news, there is no reason to study all the details of trading, the process is on autopilot, the money is there and no nerves.
All this is seemingly good, but one question arises: why with such an abundance of advantages, there are no newly minted millionaires who have deposited a hundred or two dollars to their accounts at random and bought some history-tested wonder trading robot online?
Of course, someone is quietly trading using EAs and getting good dividends. However, most traders, judging by comments on forums, feedbacks of Expert Advisors and their authors, lose everything as they did in manual trading. Why?
The main problem is the narrow possibilities of the robot algorithm. The market is very dynamic, and not always what worked perfectly six months ago will work today.
In addition, any trading instrument, as we know, has two major phases of movement: flat and trend, and it is calm most of the time.
In this regard, it is foolish to demand from the Expert Advisor that uses the trend strategy and uses in its structure the readings of, for example, the most useful indicator MACD or Bollinger Bands to trade profitably in the flat. Likewise, a robot that uses the stochastic or any other oscillator will not be useful during a trend movement of the asset.
Of course, while the daily chart is lingering sideways, the 15-minute chart may have spectacular rallies. But here we have another pitfall of automated trading. As a rule an EA is created for working on a single chart. A good robot will take into account the readings of the neighbouring ones, while a regular one will not. The trader who bought the Expert Advisor is very sorry that it is idle, and it starts to adjust and adapt the robot for other timeframes, which already leads to drawdown.
The lack of artificial intelligence is both advantageous and disadvantageous for the automated trading in Forex. Expert Advisor cannot catch the nuances understandable to a trader, feel the mood of the market. But this does not mean that automated trading has no future. Algorithms of modern Expert Advisors are so thin and precise that there are hardly any traders who can compete with them in profit. But they are usually expensive robots used by banks and other large financial institutions. Naturally, they do not guarantee a 100% profit either.
Most of us use other types of robo-advisors. And here, the main rule of choice was formulated a long time ago. Everyone remembers the cheese and the mousetrap. If you have decided to go for automated trading, you should be very careful when buying or creating an EA and not rush to install the new product on a real account right away.
To summarize, once the trader gets an Expert Advisor, he should handle it very precisely, not just hang it on the chart and wait for a money avalanche. A trend robot should work only in a trend and a flat robot should work only on sideways movements, and both of them should be placed only on the chart they were created for.
A very important point is built into the algorithm of the Expert Advisor to protect the position. This can be a simple stop-loss or trailing stop, but a failed entry or an unexpected reversal of the price should be closed at a minimum loss. There is no need to be in a hurry, even in automated trading, and who knows, maybe a thoughtfully acquired robot will become the first step to the Forbes' rating.