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Tips on choosing the Best Forex Robot

If you’ve been around in the forums that talk about the Forex, without a doubt you will always see a new person to the Forex market asking, "Which Forex Robot will give me the most profits?" or "Which EA is the best of all? These questions are basically where newbies are relying completly on the judgement of a complete strange whom has already went through the trial and error and will give them the path to wealth. It would be nice for it to be that simply.  If that would be the case, then we would all be millionaires without having to move a finger. Unless you win the lottery, we know that it will never happen.

So what are the most important aspects to look in a Forex Trading Robot?

Below are some things to keep in mind when searching for a reliable Robot or what to avoid from them once you start the process of elimination of the short list of Robots on the market. This is based on personal testing and development of metatraders EAS in the last 4 or 5 years.

1)Stay away from Forex EAS that do not offer anything else than back tests as verification of their profits.  To clarify, a "back test" is only a simulation based on tick data (data pricing from a third party or a broker), in other words, this piece of data is not a true determination of actualy market trading conditions. A delay in an execution of trade can effect severly the profits that the robot can generate. Something else that the back testing can affect it is easy to ‘curve fit’ or change the settings for a better optimization so it can be adapted to the available data. At this point what you have installed on your computer is a piece of software that is optimized to work pefectly well with historical data, instead of having a system that can adapt to current market conditions.  Just like any other market, the Forex market changes "personalities" over time and historical data can’t guarantee or transpire future performance or date of which can be expected for results.

In a nutshell, the back testing argument is quite simple to optimize an EA to generate profits, however, the downside is that we can’t use this to reflect in live trading. In other words, back testing can’t be used as a reliable indicator to determine profits for future trades on a forex robot.

2) Keep your eyes open for statements of live trading and accounts with real money.  In other words, stay away from demo accounts. Demo accounts will vary in price and speed.  They also will not give you a reliable and accurate representation of the trade and speed of such execution, even though the price data is a same, the execution of trade will vary to a point that it will effect greatly your profitability.  By having longer periods of 1000 live trading statements, the better, but keep your eyes open on any indication of "cherry picking" or where the creator of the robot is selecting trading statements for a specific period of time.

3)The trading conditions of your broker must be taking into consideration, so keep in mind the restrictions on minimal take profits and stoplosses, also leverage and spreads which can effect your EA’s operation. Also, rules regarding FIFO and hedging imposed by NFA could also effect the robot’s operation, so keep this in mind if you are going to be working with an NFA registered broker

4)Stay away from robots or Forex eas that are relying on small take profits or that the average win is minimal. in other words the difference between the average loss and the average win.  If such difference is too small, then these small changes in trade execution can effect severely your profits.

5) If any, be aware of the money management type used on the forex robo. Many of these robots use the Theory of Martingale on some way, which positively stacks as much as double lot size when a losing tradin is occurring.  If this is being done by the robot, then there’s a good chance that the system is overleveraging in the case of a long period of drawdown.

6) Stay away from forex robots that claim to have a win to loss ratio higher than 80%.  The fact is that in order to have these kind of ratios you must also carry losing trades or floating losses for long periods of time before they may see an actual profit.  This may indicate that the trade may carry a very wide stop loss or simply not have a stop loss at all.  Either of this options can be potentially dangerous to your account. Multiple times I’ve seen thes trading systems become unstuck after a worst case scenario occurs.

If you stick to these rules you can be rest assured to identify with more confidence which are the best forex robots that will most likely produce the profits you are looking for and in a more consistent manner.  Just like everything else, keep in mind that there are no guarantees. As I mentioned before, the forex market changes drastically and just because a robot has performed well for 2 years, it does not guarantee you a profit for the future.

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