5 Complete Steps To Find The Best FX Robot (EA)
Estimated Reading Time: 32 minutes
Oxford associate professor Michael Osborne, along with co-author Carl Frey, published a paper called “The Future Of Employment: How Susceptible Are Jobs To Computerisation?” The main findings are; among 702 occupations in 12 categories of total US employment,47% is at high risk of getting replaced by robots (meaning that associated occupations are potentially automatable over some unspecified number of years perhaps a decade or two), 19% could go either way, 33% are unlikely to. In the below table, the y-axis shows the number of people working in each of those categories, while the x-axis shows automization probability. Turning to the expected employment impact, distinguish between high, medium and low risk occupations, depending on their probability of computerisation (thresholding at probabilities of 0.7 and 0.3). The probability axis can be seen as a rough timeline, where high robability occupations are likely to be substituted by computer capital relatively soon. Looks most workers in transportation and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations, are likely to be substituted by computer capital. So, for instance, “sales and related” jobs have a huge chunk of positions that are at high risk of automization. Hence the big red section on the right. On the other hand, “education, legal,” etc. have a greater chunk of positions with a low probability of getting taken over by robots (hence the big light blue on the left). In short, generalist occupations requiring knowledge of human heuristics, and specialist occupations involving the development of novel ideas and artifacts, are the least susceptible to computerization. So if you’re, say, in the arts, and your job requires “negotiation” there’s virtually no chance you’re going to be replaced by a robot. If your job is in production or sales, and doesn’t involve any of the above skills you need to watch out.
As I quoted in my special report of How To Create Handsome Extra Income From FX Robot (EA) Special Report by GEM, over 80 percent of financial trading markets including the majority of investment banks and other big institutions are done by robots. Means, although financial jobs seem to be less chance of being replaced by Robot according to the above chart Trading (including FX Trading) is obviously not safe. In other words, it is a vital proof that FX software of auto-trading works and there are no single reasons that you as an individual trader are left behind. If your current job is at high risk of being replaced by robots, you need Contingency Plan as your safety-net. Read carefully this special report to know the best process to create Extra Income through FX Robot.
This document specifies the concrete process for you to choose the best Forex Robot as follows;
- Introduction – Beware of the Reality
- Five Easy Steps to Find The Best Forex Robot
- 1. Determine What You Want – Know Yourself
- 2. Set Numerical Goal & Key Parameters
- 3. Search Promising Robots & Test -Back, Forward & More Testing
- 4. A Few Elements To Ensure Better Profit – Brokers / Rebates / VPS
- 5. Tactical Portfolio Development
- Conclusion – Suggested Action Plans
- 1. Introduction – Beware of the Reality
- 2. Five Easy Steps to Find The Best Forex Robot
Introduction – Beware of the Reality
I am writing this article assuming you are familiar with Forex Trading & FX broker account,just in case you are;
– absolutely new to Forex Trading suggest you read;
Three Great & Safe Ways To Succeed In Passive Forex Trading or just new to Forex Robot (EA) then read;
How To Create Handsome Extra Income From FX Robot (EA) , for your better & quicker understanding of this article.
Let me start up with the reality of FX Robot market. The FX robot is designed by traders based on their unique trading system. Unfortunately most of the FX robot you find on-line are created by inexperienced traders who aims to earn quick buck with unrealistic claim (often just copy other’s programme). You should understand that many Forex trading systems may work well for a few weeks, or even for a few months, but they usually fail in the long term. This is especially true of indicator based systems. Indicators are sensitive to changes in market conditions. Some indicator based systems give amazing signals in trending markets but fail in ranging markets because?most of them?are not adaptable to changing market conditions. In short, a system that works this month might not work next month. So it is very hard to find a good EA that has not been curve-fitted / over-optimized and the markets are brutally tough, with a high degree of unpredictable volatility and randomness that degrade the performance of the best conceived robots. Consequently, the harsh reality is that 90% of Robots is said to end up failing, either losing a bunch or just barely staying alive. That’s why you have to be very careful when selecting a robot for trading. With all that said, let’s see the concrete process to find the best FX Robot in order to be the 10% of profitable trader successfully.
Five Easy Steps to Find The Best Forex Robot
1. Determine What You Want – Know Yourself
|Type of Personality||Type of Robot To Be Chosen|
|A. Autonomous||– Minimum adjustment &
steady past performance with little leverage
|B. Aggressive||– Scalping strategy &
rapid progress with heavy leverage
|C. Anxious||– Low trade amount &
drawdown with prompt profit locking
|D. Minimalistic||– Simple & effective
style with clearly understood entry / exit factors
|E. Complex||– Constant & multiple
trading with complicated approach
Assess your personality carefully to find out which A.-E. type you’re fallen into, then you can decide which type of robot you should choose. Assuming you’re C. type, any robot type that relies heavily on leverage or has any significant amount of risk, like the ones taken by B. or E. will cause negative emotions in the course of trading thus it will be just a matter of time before you quit. As you may have noticed that one of the underlying concept behind this first process is gauging your Risk Tolerance, which is paramountly important for sustainable trading. Financial theory tells us that investors should expect a positive relationship between risk and return. Those who assume greater levels of market risk are expected to earn higher returns, while lower risk taker should earn lower returns. There is no such thing as High Return with Low Risk. Don’t expect aggressive return if your risk tolerance is low. Different FX robot can be programmed to make different decisions. They can run on a multitude of different algorithms based on your needs. Remember, FX robot can eliminate the human emotion (that is supposed to be the biggest enemy for successful trading) in every trading decision, but you as a human who will still be affected by emotion caused by the result of FX robot. That’s why you need to first determine what yo need from a Forex robot while knowing the level of your risk tolerance before moving to actual search. Be absolutely honest to yourself & assess yourself objectively for your steady & sustainable success. Hope you realize how important this first step is.
2. Set Numerical Goal & Key Parameters
Once you identify your personality as an investor & determine the broader type of FX robot you need, you may want to set your Numerical Return Target. There is no established range of return expectation though just an indicative annual return % for each of the above A. – E. are;
|Less than 30%||20 – 60%||30 – 80%||50 – 90%||Over 80%|
Let me emphasize, there is no clear rationale behind each %, but just my subjective judgement thus each investor should determine own % to the level they feel confident & comfortable. Actually this goal setting is the handy numerical base to search your best FX robot, because Return % must be your core interest, and thieving the numerous number of FX robot available in the market by using this simple number is the easiest way. After you set the return % target, the next step would be to set proper numerical target in key trading parameters. There are various parameters to assess FX Trading (or say Trader’s strategy), for through analysis,
However, for FX Robot, let me simplify them into 2 important factors – “Profit” & “Drawback“. Many investors is often said to feel that a high return is not attractive if extraordinarily high level of risk needed to earn that return, while lower levels of return may be quite attractive if they come with minimal risk. So whichever investor personality you’re fallen into, Return to Risk performance will be very important for your satisfaction thus be a key factor to set your numerical goal for your FX robot trading. Profit & Drawback are the simple & important parameters of that factor. Let’s see each for more details.
You may want to analyze Profit parameter by setting target in 2 key KPI (Key Performance Indicator) of Profit / Loss Ratio and Expectancy.
Profit & Loss Ratio It answers if the robot is going to make money with the formula of;
= Gross Profit / Gross Loss If it is less than 1 you should eliminate it immediately. Bear it in mind that there are cases that even less than 1 ratio ends up making money but those must take on way to much risk for the amount that it earned therefore should be avoided.
Expectancy It tells you how much you can expect to make on a trade, which is calculated as;
= [% of winning trades (average profit per trade) ] – [% of losing trades (average loss per trade + transaction cost)] You want this number to be positive, the bigger the better.
Draw-down is the % FX robot loses from its last high point to its next low point. This can give you an idea of the potential drops in value that you might experience with that robot, that is the most critical risk KPI. You find the draw-down % in the equity curve. Most robot selling site displays the graph. You always need to look for an equity curve that slopes upwards, as this shows that the robot is profitable. If the graph looks really choppy and is up and down all the time, you can expect that it’s a very volatile robot, means very risky. This volatile robot will most likely have some steep drops. A smoother curve is a less volatile robot. So, this quick visual assessment will give you some great insight as to what to expect with your robot. Then you can start to get into the numbers. There are three parts to a draw-down analysis – the max draw-down, average draw-down, and the draw-down recovery. You should look at all three of these statistics as follows (see the image at the bottom of the explanation: y-axis can also be equity balance);
As said the draw-down is the % that the robot loses from its high point to the next low point. The max draw-down is simply the maximum drop (from Peak to Valley / Trough) that has occurred in the past that can be considered as a worst-case scenario with that particular robot for your account. Imagine your $10,000 FX account experiences 50% draw-down immediately, you’ll be left with $5,000. Remember, such aggressive robot may end up 150% equity growth based on risk / reward theory. But during the course of trade, there is such a chance as wiping out 50% of your entire balance. Can you be tolerate with it? That’s how you see the max draw-down.
Any robot will have several draw-down amounts. Let’s say a robot had 3 draw-downs, 7%, 3%, & 14%. Simple average calculation of (7%+3%+14%)/3 = 8% as the average draw-down that gives you an idea of how much you may lose during a draw-down period. Whereas the max draw-down showed you a worst case scenario, this gives you a more normal idea of what to expect on a typical basis.
It is an essential indicator to look at when evaluating any automated system. It measures how quickly a system gets out of a draw-down – the average time that it takes to get back to the positive after a draw-down. There are 2 ways to look at this: how long or how many trades will it take. Generally speaking, shorter is preferable although it depends on the approach you take. Remember that a less volatile robot (means less risky & more conservative) robot may take longer to recover from a draw-down (in a slow and steady manner). On the other hand, a robot with a quick recovery may be the result of taking big swings in both directions, up and down, means aggressive & high risk strategy.
, by now you could set the following parameters to search your best Forex Robot (EA);
- Annual Return % Target — should reflect your type of personality
- Profit & Loss Ratio — should be over 1 (the bigger the better)
- Expectancy — should be positive (the higher the better)
- Max Drawdown — should be within the % of your tolerance
- Average Drawdown — ditto (the lower the better)
- Drawdown Recovery — ditto (generally speaking, the quicker the better)
Allow me to note a few basics. Some newbie traders / investors make the mistake of thinking that, in order to be successful, they should never incur losses. Consequently, they depress too much and take it hard every time robot trade goes against their way. Remember, 100% win is literally impossible, every robot looses, the key is wheather you end up with your return target. Don’t be bothered by the loss day by day, nevertheless you as a human will be emotionally suffer if your robot faces losing streaks. Therefore assessing your risk tolerance and set up the numerical goal with key parameters are very important to avoid being panic.
3. Search Promising Robots & Test – Back, Forward & More Testing
Now, you are ready to look for the prospective FX Robots that will suit you best. The whole process up to the real trading can be outlined as follows;
- Search Free Robots – select the ones that match your Type Of Robot & Return Target
- Conduct Free Testing – minimum Back & Forward Testing, should be More
- Start Real Trading with a Micro Account
- Start Real Trading with a Standard Account
Let’s see each details.
I. Search Free Robots
If you’re new to FX Robot, it’s a good idea to start with Free Robots until you get familiar with how FX Robot works. – probably the largest library features codes of Free Trading Robots(Expert Advisers). Each EA shows its brief description so you can assess which one will suit your type of personality and download them from the MetaTrader 4 or 5 platform (for brief explanation about selecting FX broker & installing Metatrader, see the later section of 5. A Few Elements For Better Profit – Brokers / Rebates / VPS).
II. Conduct Free Testing
At Least Both Back & Forward Testing Back test is done using historical data (under the past market conditions) on a particular currency pair. Suppose you have historical data for the currency pair like EUR USD, you perform a back test to check how the robot’s claim is genuine & if your above numerical parameters are met. Use Free Software access HERE
Basically a back test will hold better value if it has at least 100 trades and covers at least 10000 data points on the chart. So if the robot trades on the hourly chart, you need to test at least 10000 hours worth of data. Regarding the testing period, make sure that it must include a down market, a sideways market and an up market. A quick way to do it is to pull up a chart of the time period you just tested. Now go to the frequency that is 1-2 intervals higher than where you conducted your test. So, for example, if your test was done on an hourly chart, look at the 4 hour chart or the daily, which should also display a clear up trend, a clear down trend and a clear sideways range-bound market on this chart. Even you get satisfactory back testing result, don’t stop here. Why Because the back test misses the widening of spreads and the slippage that take place during live trading. The spread is widen by your broker if the liquidity thins in the time of high volatility (like when new economic news releases) or low trading (during night when big banks closes) happens. In the back test, these factors are simply ignored in addition to the slippage that are always present under live trading conditions. Now, you can imagine how inaccurate a back test can be.
Therefore you need Forward Test using real time data in your broker’s Live demo account with fake money in order to make sure that it performs to your standards without risking your hard earned money. Your broker will instruct you how to do it. Remember demo account may also slightly be different from real accounts (the demo get filled quicker and have little or no slippage). Don’t base your decision to go live on 1 or 2 trades but keep doing in demo account until you have enough data to feel confident.
More Solid Testing (say Acid Test) where you can test using the following available key methods FREE;
- Stress Testing in the random delay mode
- Testing in a different trading environment
- Testing on a different symbol/time frame
- Back-testing on bad historical data
- Back-testing over extended period of history
- Forward Testing.
- profit factor that is too high
- huge profit value on historical data
- a great number of external parameters in a trading system
- intricate rules of money management.
When you BUY the FX robot rather than free robot, it’s strongly advisable to do such More Solid Testing.
III. Start Real Trading with a Micro Account (or Mini Account)
If things look good, it’s time to run the robot with your real money. However, as said before, a real account is much more likely to have slippage thus cutting into potential profits. So, even the demo testing looks good, it’s essential to trade the smallest amounts possible, just to see how the trading works with your broker. So start with micro account on Metatrader 4 (where every pip is worth only 10 cents per point) or Mini Account (its lot is equivalent to $10,000, but with 100:1 leverage you need $100 as minimum capital) to test and make sure that it works with real money. That is one of the nice things about Forex – you can trade very small or very big. Meaning you can get the experience of trading real live money without risking too much.
IV. Start Real Trading with a Standard Account
If you feel comfortable in a live Micro Account, suggest slowly and carefully scale up the size of each trade at a reasonable pace. After you get enough confidence in the Micro Account you may want to switch to standard accounts to deal larger lot (, which affords you to access to standard lots of currency – each $100,000, but as you know, this doesn’t mean that you need to put down $100,000 of capital, 100:1 leverage allows you to trade with as little as $1,000). One of the biggest advantage to do that is accessing better service of FX broker that includes better Spread – usually Micro Account’s spread is not as good as the standard account, thus trading in the standard account will improve your profitability, which is significant if you take Scalping strategy in the first place you will have to contact your broker if they allow scalping and investigate if the spreads of your broker is low enough for the currency pairs you intend to trade).
4. A Few Elements To Ensure Better Profit – Brokers / Rebates / VPS
FX Brokers Choice
As noted at the beginning, I have not covered the first stage of the process – Opening FX Broker account. Remember, there are hundreds of on-line brokers you find via internet but again the safety should come first thus working with a regulated, large, well capitalized firm that provides good trading conditions is essential to trade your robot.
The following information will assist you to select quality FX brokers;
The MetaTrader 4 (or 5) program can be downloaded directly from MT4 web site or through most of FX Brokers that offer the program.
It’s often the case that FX Robot trades more frequently than human. FX broker’s transaction costs such as commission / spread will affect your long-term profit significantly. Thus, you may find Cash Rebate Payment for your robot’s every FX trade offered by the following programmes (these are supposed to be the most established ones in this industry) must be of great help;
For example assuming your broker takes 2 pips spread and if you get 0.5 pips as a rebate then the broker’s spread becomes 1.5 rather than 2 when you use the above programmes. This is a great way to enhance your success with completely free cash. You can also look at it this way if your robot trades 20 lots per month and you are set up to receive a rebate of $5 per lot, you will get $100 for free every month. This will enhance your trading profit and help you pay for various Forex robots and products that you may want to purchase.
A virtual private server (VPS) is a computer running on a hosted server you can access directly through your PC’s or laptop’s internet connection. It’s advisable to use VPS when you trade with robot due to the following key advantages;
- you do not need to turn on your own computer all the time
- you do not need to rely on your internet / power connection for your robot to keep running
- you can expect low latency, means faster trading execution & low slippage thus better profit
So, choose the right broker, use the cash rebate and install the VPS are the ways to secure your safety & improve your long-term profit with FX Robot Trading.
5. Tactical Portfolio Development
Firstly, let me remind you that FOREX is a very attractive investment opportunity from the viewpoint of its low correlation to other asset classes like stock, bond, commodities & properties etc. This means that portfolios comprise of FX trading is better diversified than those invested only in traditional assets (that’s also true for Sports Betting
Since the diversification is MUST strategy to minimize risk & optimize profit, it’s good to apply to within FX trading as well. Means, once you get used to the FX Robot Trading, you may consider to develop FX Robot Portfolio which comprises different currency pairs with low correlation for real time correlation table. Long story short, perfect correlation (1 or 100%) is the maximum risk (no risk hedge) while perfect inverse correlation (-1 or -100%) is no risk but no profit creation. You need to carefully determine (your basic portfolio strategy read HEREfor details) though, from the perspective of risk aversion, composing the pairs that have relatively low correlations (for example between 0.5 & – 0.5) would be one way, FYI.
On top of the currency pairs, what you may want to consider is Timeline concept. As discussed before, the performance of forex robots generally degrades over time as market conditions change. Some robots work better in range bound markets while others work better in trending markets. For example, during times of low volatility when a currency pair is moving sideways, it would make sense to trade a range strategy. If you tried to apply a trend based strategy during that same low-volatility period of time, it’d probably produce poor results. But if you used that same trend strategy when volatility was higher and a currency pair was consistently moving upward or downward, your results would likely be much better. One of the toughest things to do for a trader is to determine if the market is in a range or trending.
It’s important to monitor performance against your initial expectations, and be prepared to stop trading or adjust setting at the first sign that the robot is no longer doing its job. Anyhow, to be successful with a Forex robot you should not give up the gains that it makes during a favorable market when the market is unfavourable. Considering the performance of some of the better robots, the money you pay upfront can soon be recouped and you may be able to gain decent profit rather quickly if you trade it on a reasonably sized account. Therefore, in order to keep producing profit from your FX Robot Portfolio, you may want to keep rebalancing, say promote metabolism by stopping the obsolete robot & adding the fresh robust ones if any proper adjustment is difficult to be done (unfortunately it’s usually difficult).
Again, to mitigate your risk further, make the best use of Money Back Guarantee offered by many robot venders. This scheme enables you to get a refund inside a certain trial period (longer one could be up to three months etc). Looks many users are lazy enough to claim it though this is not a deal-breaker but you have right to claim & usually the vendors will refund without any dispute, thus don’t forget or hesitate to do so, which will minimize your risk before you earn profit with the poor robot.
Moreover, it’s important to forecast the market condition change though as said it’s one of the most difficult thing for any traders / robots since many indicators and approaches have been attempted but with very little success. Given the fact, to make sure that your robot is reasonably sustainable you must back and forward test it through all kinds of market conditions – the above More Solid Testing does obviously give you safer choice.
Conclusion – Suggested Action Plan
Let me repeat, the vast majority of the FX Robots selling on the internet doesn’t work as it claims. So firstly ignore any products without any 3rd parties’ verification through testings but only self claim. Incidentally, let me give you one more reason why the self-claim back test is not enough as follows;
- Curve Fitting
Any system can be profitable on backtests only if many rules are added to it. Adding multiple rules means curve fitting at it’s purest form. The system will fail on live trading because statistical relevancy is destroyed. Those rules may not be valid for future markets even if they worked in the past. Curve fitting by adding multiple rules is a trick used by commercial FX Robot (EA) vendors. Short term rules that don’t make sense on the long run are added just to hide the drawdown periods. If the equity curve points straight up then it’s the first sign of curve fitting, that’s why I like reasonably ugly looking equity curves that clearly show the drawdown period.
Secondary, also don’t jump on to the robots introduced in ranking sites or review sites or forums,which could be heavily influenced by reviewers’ or talkative members’ subjective / limited experience.
Some of the review sites show testing results and if the testing period is long enough ( for example like this) it’s safer, but if they use only back tests, the live trading result could be significantly different. Let me reiterate that unless the robots are verified through More Solid Testing (Acid Test) as explained in the above 3. II it’s just a matter of time before they fail, means you have large chances to loose money eventually.
We plan to gather quality back-testing & forward testing results from the More Solid Testing site as well as other credible testing sites and select the promising FX Robots (EAs).
Protect your hard earned money by not wasting with poor FX robot but using only carefully examined ones.
Erik Brynjolfsson, a professor at the MIT Sloan School of Management describes 3 areas where humans have a distinct advantage over machines which are actually identical to Michael Osborne‘s paper as follows (BBC article);
“Creative endeavours: These include creative writing, entrepreneurship, and scientific discovery. These can be highly paid and rewarding jobs. There is no better time to be an entrepreneur with an insight than today, because you can use technology to leverage your invention.
Social interactions: Robots do not have the kinds of emotional intelligence that humans have. Motivated people who are sensitive to the needs of others make great managers, leaders, salespeople, negotiators, caretakers, nurses, and teachers. Consider, for example, the idea of a robot giving a half-time pep talk to a high school football team. That would not be inspiring. Recent research makes clear that social skills are increasingly in demand.
Physical dexterity and mobility: If you have ever seen a robot try to pick up a pencil you see how clumsy and slow they are, compared to a human child. Humans have millennia of experience hiking mountains, swimming lakes, and dancing?practice that gives them extraordinary agility and physical dexterity.”
I fully agree with the point of There is no better time to be an entrepreneur with an insight than today, because you can use technology to leverage your invention. Allow me to repeat that you’d better have a Plan B for your financial safeguard and you don’t need to have massive capital or skill to start your sidebusiness but just to be an entrepreneur by using modern Technology Economically & Passively via Forex Robot – incidentally CEO job is one of the least at risk being replaced by robots, FYI.
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