FOREX robots are software programs that submit online trading orders. They have grown in sophistication over time, and the best can be programmed to automatically execute one or more trading strategies. As real-time programs, robots can instantly respond to a large volume of price data, well beyond the abilities of human traders. If carefully prepared and monitored, FOREX robots give traders a number of advantages.

Trading Signals

A trading robot is connected to an online trading account and receives constant price updates. The robot can be programmed to recognize dozens of technical trading signals and execute real-time orders based on those signals. A technical trading signal is a buy or sell recommendation arising from the pattern of previous FOREX prices, a form of technical analysis. Price trends and momentum indicators are just two of the different types of analysis robots can provide. Robots are always mathematically precise and never need to take a break, two attributes that cannot be ascribed to human traders.

Strategy Testing

Robots can operate in test mode, in which all the trades are hypothetical. This capability is enormously helpful in backtesting trading strategies. Backtesting involves utilizing previous trade data to generate hypothetical buy and sell recommendations, and then comparing the resulting gains and losses with what actually occurred in the market. Through a series of refinements, a trader can attempt to fit the data to real market outcomes in the hope that the resulting strategy accurately predicts future price movements.

Discipline

FOREX trading can be emotionally stressful. Traders are typically torn between fear and greed. When a trader’s emotions become too strong, they can subvert the discipline needed to stick to a trading strategy. Often, panic selling can be an opportunity to buy a currency inexpensively, but it takes intestinal fortitude to stand up against the crowd and buy something that everyone else is selling. Robots have no such problems, and if a trader has gained confidence in the robot’s abilities, he may benefit during an emotional trading period by allowing the robot to buck the crowd.

Stealth

One type of FOREX broker, a market maker, trades against its clients. As a client, a trader is best off not broadcasting his intentions to buy or sell a position at a certain price through limit and stop-loss orders. These types of orders establish prices that will trigger a trade. Armed with knowledge of these trigger points, an unscrupulous market maker may manipulate prices to a trader’s detriment. Robots don’t need to pre-establish trigger points with limit and stop orders since they monitor the market in real-time  and can issue buy and sell orders at trigger points without first warning the broker.