15 Questions You Should Ask to Create a Robust Forex Trading System

Posted by Fullerton Markets on February 24, 2021 at 1:42 PM

Do you want to know more about automated Forex trading? 

In our previous blog, we delved into what it means to automate your trades and the pros and cons of doing so. But there's more to this process than we can discuss in one article.

So, we've compiled some of the frequently asked questions related to the topic to provide you with more valuable information in one place. 

Let's get started.

1. What is the difference between expert advisors (EAs) and Forex robots?

Expert advisors (EAs) run specifically on MT4 and MT5 trading platforms. While most EAs are automated, some only provide signals that you’ll have to execute manually.

An excellent example of an EA is a currency strength dashboard that shows in real time which currencies are strong or weak. It’s up to you to trade based on that data or not.

Forex robots can be programmed independently and fully automated. They use sophisticated technology such as artificial intelligence and machine learning to place orders or manage trades.

2. In which financial markets are automated trading popularly used?

Aside from Forex, automated trading is also used when trading cryptocurrencies and index CFDs (Contract for Differences). Different sectors will require different solutions in automating trades.

3. Can you profit from automated Forex trading?

Yes. Automated trading systems can help maximise your chances of earning a profit. They're programmed to make the most from market movements and investigate charts and figures in a coherent way, after all.

What it doesn't do is guarantee a 100% profit. Like any other trading and investment vehicle, risks and losses are as much part of Forex trading as earning and winning, whether currencies are traded manually or automatically.

4. Is a trading robot effective?

To some extent. Forex trading robots can churn out at least 90% of data from the millions of trading charts they scan in mere seconds, some of which might be accurate. If their findings match the criteria you set, they execute a trade automatically.

You must remember that robots are limited to how they're programmed and configured, making them effective but not fully dependable. Forex bots don't keep up with current economic conditions or financial news. But you can. You must combine research and human observation to maximise a trading robot's profitability.

5. What are the limitations of Forex robots?

They're only most effective within a tight range and a well-defined trend, and can quickly unravel in unstable markets and amid negative trends. While scalping robots can be quite effective, the profits amount to just a few pips. During large price swings, whatever profit you’ve made could be wiped out.

6. What is the best and most effective automated trading system?

It will be a system that meets the following criteria:

  • Matches your trading goals and strategies
  • Protects your privacy and security
  • Relevant to the current market conditions
  • Supports manual trading in case human intervention is needed

7. How can you choose the right automated trading software to use?


checklist of the best automated trading system

  • Define your trading needs and goals and then look for the appropriate automated trading program.
  • Read third-party customer reviews and check for operational issues, profitability, and terms and conditions.
  • Avoid free or cheap automated trading software as this might not work or could be a scam. However, compare the cost against the benefits when paying for an automated system. Consider the size of the trading account and the possible returns on your capital.

Always test an automated trading system on a demo account to evaluate performance and identify potential issues before trading actual money.

8. What are the most popular trading platforms that support automatic trading?

The four most popular automated trading platforms are MT4, MT5, cTrader, and NinjaTrader.

Both the MT4 and MT5 platforms use MetaQuotes Language (MQL) to create expert advisors in different versions. The former uses MQL4 language, while the latter uses MQL5. EAs on these platforms are considered the gold standard in automating trades in Forex.

Learn more about the differences between MT4 and MT5.

cTrader uses C# to build automated trading systems instead of a custom programming language. Because the language is used worldwide by millions of developers, it can work seamlessly with a range of platform functionalities.

cTrader uses a platform's tools to backtest and optimise strategies.

NinjaTrader is more popularly used in the US to trade Futures and Options. It provides the average investor with an excellent example of how an accessible automated trading system should work.

9. What are the types of trading automation?

Automated or algorithmic trading comes in three basic types--fully automated trading systems, copy trading, and signal generators.

Fully automated trading systems use trading robots to generate trading signals and execute trades when predetermined parameters are met. Human intervention happens when a trading program is created.

A trader identifies stop losses, lot size, take profit and other parameters that will serve as the basis for the instructions that a trading robot must follow. Once coded, the robots do all the work.

Copy trading involves copying trades from an experienced strategy/signal provider (SP). A trader or strategy/signal follower (SF) follows or copies an SP’s trades that are automatically executed. The process will continue to run until an SF decides to manually stop copying an SP.

Depending on a broker, an SF can specify parameters of how much of their account will be used to copy trades made by an SP.

Some brokers offer trading signal services, where a trader can subscribe for free or for a fee for trading signals that dictate the next best move. Signals may be generated using automated analysis or churned out by a team of experts who perform technical and fundamental analysis.

10. How can you tell if a Forex robot is a scam?

  • When it's offered for free or at a nominal cost. No creator will give away a trading system for free if they’ve spent time and effort making them unless the program doesn't work.
  • When profit is guaranteed. As previously mentioned, profit is never 100% guaranteed even when an automated system is used.
  • When a robot is marketed as capable of developing its own strategies. Again, the best automated system is accompanied by research and analysis and not fully independent from a broker or trader.
  • When a system is offered as a long-term, play-and-forget solution. Automated trading is only recommended in the short term and must be adjusted as needed.

11. Who uses automated Forex trading software?

Newbies, professional, and seasoned traders can use and benefit from automated trading software. After all, automation can be created to meet varying needs and levels of trading knowledge and skills. It all comes down to how the system is programmed.

It's up to the trader whether they rely on robots or on their own powers of analysis and deduction to make their trading decisions.

12. When is the best time to auto-trade Forex?

Automated trading software is best used following economic announcements from major market players and when technical signals are at their most reliable.

Markets often show significant movements during major economic publications, which is why some automated trading programs are created based on economic calendars.

On the MT5 trading platform, the economic calendar is built within the system, making it one of the remarkable features of MT5. You can view headlines right from the platform and filter them by country and other parameters.

Automated trading software can be programmed to monitor economic events and then automatically trade following movements brought on by the announcements of such events.

For example, an automated trading system is triggered to go long on USD following the announcement that the employment rate in the US is lower than what everyone expected. Trade is auto-executed when the price closes above exponential or simple moving average of a certain timeframe.

When there's no data on the economic calendar, technical signals are the most reliable. Assets are more likely to move according to technical levels, making it the ideal conditions to auto-trade in Forex.

13. Can you automate Forex trading for free?

Yes. Rather than buy pre-programmed software, you can program your own, especially if you have the necessary coding skills. To create a free automated system that works for you, you must set clear parameters on opening and closing trades and for managing risks. Then, choose an EA that is compatible with the programming language you want to use.

14. Can you access/use expert advisors on demo accounts?

Yes. A demo account in MT4 or MT5 will allow you to run EAs and test your strategy. You will be able to trade and backtest without risking your account.

Fullerton Market's Currency Strength Dashboard, for example, is available on both demo and LIVE accounts. Just open an account with us and see for yourself how this EA can help automate your trades.

15. Can EAs help you develop a trading strategy with a higher win rate?

Yes. If you test a strategy using a bigger sample size, automated systems/EAs can help you identify if the rules you've set are able to increase your profitability or not.

If there are other questions on automated trading you want answered, let us know and we’ll try to provide you with the answers you’re looking for.


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