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Many people are interested in making money on autopilot using a forex robot. However, most of the people who trade with a robot lose money. Why? Let’s discuss the mistakes that you should avoid while trading with a forex robot.
Forex robots are sometimes over hyped by the vendors. There is no holy grail in trading. I want to make this very clear. To make a robot work, you need to learn how to test it and optimize it. Most people who buy a forex robot have no clue how to test and optimize it. They simply read the hyped up sales copy on the robot site, download it. Install it on their live account and bam they get burned!
This is the most common mistake. Avoid it. First backtest the robot on the MT4. Many people don’t know how to do it. It is not difficult. You can learn how to backtest a robot obtaining 99% accuracy. This backtest can show you how the robot behaved in the past, what was the drawdown and how does it’s equity curve look like. It is very important for you to know these things.
Now, you are not spending a single dime on backtesting but this backtesting tells you that the robot has the potential to make money in the live market or not. Once you have done the backtesting, do the forward test. Forward test means trading the robot on the demo account. This will give you further confidence that the robot can make money in the market.
Once, forward test is over, start trading the robot with micro lots. This way, you don’t lose much when the robot makes a bad trade. After a few weeks, when you get satisfied that the robot does work and has got a nice equity curve, you can start trading a standard lot with it.
In nutshell, don’t make the common mistake of live trading a robot without first testing it thoroughly. Most of the time, the default settings that have been provided by the developers need to be tweaked in order to get a better performance. You also need to test the performance of the robot using the default settings. Whatever, learn the art of backtesting and optimization if you are really interested in using a robot. Don’t think that the robot is going to make money for you without first testing it!
Another mistake that you need to avoid is always go for a robot that has a 60 days money back guarantee. This way, you can test it thoroughly.