How To Use AI In Forex Trading

2/19/2023, 12:44:17 AM - Eddu Oz
How To Use AI In Forex Trading

Forex trading robots are designed to assist traders in automated trading as well as technical analysis and repetitive trading elements. They can automatically trade 24 hours a day, and you just need to buy them online. But can AI in forex trading really help traders maximize profits? In this article I will talk about what “roboforex” are and give recommendations on how to use them effectively.

AI in Forex Trading

Key Takeaways

•Before using AI, the AI should be tested on historical data in various market conditions and on various currency pairs.

•If you are short on time to trade Forex, or if you find it difficult to stick to a trading strategy, then a fully automated system may be a good option.

•Forex robots can only work based on how they were originally programmed, which can put them at a disadvantage.

Automated Trading Strategy

A Forex trading strategy is a set of rules that a trader uses to buy and sell currency pairs. Usually you create a trading strategy, and follow it manually, but many use computer programs to implement an automated trading strategy. They are sometimes referred to as FX robots or simply “bots”, which are highly specialized computer programs designed to perform many different trading functions.

These range from informing traders when to place a trade (known as “signals”) to automatically placing and managing trades on behalf of the trader. It can be a custom Forex robot with its own built-in trading rules, or it can be a system that a trader has developed himself to follow his personal trading strategy.

Buying a commercial automated trading system is much easier and faster than creating one yourself.

There are many forex robots on the market. Some of them are well established systems, but there may be rogue bots, so it is important to do your analysis before making a purchase and make sure you are purchasing from a trusted source.

You should also make sure that you have a complete understanding of the robot you have chosen and are confident that it will perform in accordance with your own trading goals.

What Should be Considered When Buying?

The robot should be tested on historical data in various market conditions and on various currency pairs. Order size is also important – some robots work best with a specific order size, so things can go wrong when you change the order size. Consider Real-Time Trading Results – Make sure the promised results are based on live market trading, not just simulations.

Pay attention to the drawdown – it is the difference between the high and low points over a certain period. When it comes to drawdowns, traders have their own personal preferences, so you should choose the robot that suits you. And, of course, trust – look for positive user reviews.

For most novice traders, the idea of ​​using specialized computer software to perform all the complex aspects of trading is likely to be very tempting. But it is not as easy as going about your day to day life, letting your forex robot do all the work and watching your trading profits go to your bank account.

Unfortunately, there are many fraudulent bots on the market designed to make people believe it, but the best automated trading robots require regular human involvement.

Types of Automation

When it comes to what tasks a forex robot can actually perform, there is a wide range to consider. Some of the simpler FX robots are programmed to simply send trading signals to traders, while others can act on these signals, such as deciding when the best (or worst) time to trade is. In total, there are two types of automated trading systems available:

1. Fully Automated

A fully automated trading system scans the market for trading opportunities and trades electronically on behalf of its user based on a set of predefined rules. It automatically generates a stop loss, trailing stops and profit targets as soon as a trade is opened. There are several advantages you can consider when choosing a fully automated system.

Speed – The program can identify and act on market opportunities much faster than a human.

Discipline – emotions can cloud a trader’s judgment; bots do not panic or anxiety and will always stick to the plan.

Time – Using a fully automated system makes trading easier, leaving you free to do other things.

If you are short on time to trade Forex, or if you find it difficult to stick to a trading strategy, then a fully automated system may be a good option. However, you must understand that you cannot just set it up and then sit back while the money drips into your account. Monitoring will be required to identify and resolve any problems.

SEE ALSO: Best Forex Signals That Are Free to Use

2. Semi-Automatic

The semi-automatic system uses a computer program to analyze the currency markets and find trading opportunities, again based on a pre-programmed trading strategy. It then sends trading signals to the user with entry prices, stop-losses, and profit targets, and the trader must decide whether to act accordingly and then execute the trade manually.

As with full automation, this system frees up the trader’s time by doing most of the preparatory work for him. It is able to scan and analyze markets much faster than a human, and helps reduce emotional trading by sending alerts based only on strategy.

Pros and Cons of FX Bots

There are several reasons why people use forex robots. However, before buying and launching a bot, it is important to weigh the advantages and disadvantages of using an automated system and recognize that no forex robot can offer the perfect trading solution.

Many inexperienced traders prefer to use forex robots because they hope they can easily make money in the foreign exchange market without having to spend a lot of time trading or performing any manual actions. Before using it, traders must first identify a good currency pair and an ideal timeframe to trade.


1. They can Trade 24/7

People are usually confined to trade during certain periods of their waking hours and have other obligations such as family, work, and recreation. Even the most dedicated traders need a break.

2. They are not Influenced by Human Emotions

Forex robots follow a set of predefined rules and they will stick to them no matter what. People find it difficult to overcome emotions such as fear and greed, as well as their own biases and assumptions. Even when traders have a solid strategy, it can be difficult for them to think critically and objectively in the midst of the moment. The automated system eliminates the risk that human emotions can bring into trading.

3. Bots Work Faster and More Efficiently

A forex robot can scan markets, find opportunities based on predefined parameters and execute trades according to its rules in a matter of seconds. A trader doing this manually is likely to spend much more time and may miss out on a profitable trade.

4. They can use more Complex and Sophisticated Trading Strategies

Robots are much better at multiple tasks than humans, so using an automated system allows traders to have multiple conditions for things like entries and exits, stop loss and profit targets, all of which work at the same time. Forex robots can also track multiple currency pairs at the same time.

5. They Make Backtesting Easier and Faster

Backtesting is the process of testing possible trading strategies on historical data and using this data to optimize the chosen strategy. Bots can download, store, and analyze large amounts of historical data, allowing traders to measure the effectiveness of various strategies before applying them in the real market.

SEE ALSO: 8 Best EA Forex Robots in 2021

6. The Bot is Available to Everyone

The easy availability of forex robots means you don’t need to be an expert to run it on your computer and start trading Forex. However, you should always carefully research any automated trading system you intend to buy and try it out on a demo account before moving on to the live market.

Cons of Using FX Bots

1. You Need a Reliable and Constant Internet Connection

Forex robots should run on a good computer with a reliable internet connection. Any latency on the server can cause crashes. And like any other computer software, they can also be affected by hackers and viruses.

2. They Have no Capacity for Human Thoughts or Imagination

Successful traders have vast skills and knowledge, applying research, analytical thinking, observation, and a certain amount of imagination and creativity to predict how the markets might develop in the near future.

Forex robots can only work based on how they were originally programmed, which can put them at a disadvantage.

3. They Cannot Read and Interpret Fundamental Data

Forex robots are good at technical analysis, which involves reading historical market statistics and price charts to predict what might happen in the future. But they are not that useful when it comes to fundamental analysis. Fundamental analysis is a method of valuing an asset by examining external circumstances and influences such as economic or political events and industry trends.

4. They are Vulnerable to Non-Trending Markets

Forex robots are designed to find and act on positive trends and trading signals in the market. This is fine if the market is trending – the price usually moves in one direction. But if the market becomes unstable or moves in a horizontal direction, this can affect the functionality of the robot.

5. Most Forex Robots are Scalpers

Forex scalping is a trading method that involves holding currency pairs for a short period in order to make a small profit. As a rule, there are small price movements during the day, and scalpers take advantage of this by opening and closing a large number of positions in one day. The goal is to make a small profit of 5 to 20 pips per trade (a pip is the unit of change in a currency pair). Most forex robots follow a similar system, setting a goal of just a few points for each position they take.

6. Risk of Bias in Data Mining

Biased data mining – is when the analyst is constantly looking for data sampling, until it finds a pattern, resulting in market developments is given too much importance, which may have been caused by an accident or an unforeseen set of circumstances. Likewise, commercial forex robots tend to pick one test out of hundreds and present it to the trader as the most likely outcome, even if the results may not have been tested thoroughly enough.

SEE ALSO: The ABC of Forex Robots and How They Really Work

Frequently Asked Questions (FAQ)

1. What is Artificial Intelligence in Forex?

The artificial intelligence robots are capable of instantly generating an automatic technical analysis on the financial asset and the unit of time of your choice. It can instantly analyze the chart of a stock, an index, a commodity, a future, a Forex currency pair or even a cryptocurrency.

2. Can You Automate Forex Trading?

Yes. Automatic trading makes it possible to be present simultaneously on all the markets without the risk of handling errors.

3. Is AI Trading Better Than Humans?

Predictive AI can help people make wise investment decisions, lowering their risk of making a bad decision. By only focusing on data, not human emotion, AI can also be more trustworthy than a human-financial-advisor.

Final Thoughts

Summing up the above, we can conclude that a well-chosen forex robot can become part of your trading strategy, but you should not completely depend on it. Successful trading requires human skills and effort that no robot can replace. Many experienced traders suggest using robots only after the trader has mastered manual trading skills to distinguish a well-tuned bot from a scam.

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