What is a Forex Robot or Forex EA?

A Forex Robot or Forex EA (Exper Advisers) is a piece of automated trading software based on an “Algorithm” that execute trades in the MT4 or any other Trading Platforms in your behalf. The most popular robots for retail traders are built around the Metatrader Platform called MT4 or MT5 as the last release FREE platform. These robots run on MetaTrader as “Expert Advisers” and they can do anything from giving you a signal to place a trade, to placing and managing the trade for you automatically.

If you have a good forex strategy which can be simple or complex,  strictly mechanical and doesn’t require a human in the decision-making process, you can program your forex robot to trade for you 24 hours a day by using a VPS  (Virtual Private Server) service.

There are a lot of companies that create and sell forex robots, or even make one for you with your requirements and guidelines. If you’re in the market to buy one, be very careful who you are going to deal with. It’s very common for a company to be established overnight and start selling an “instant riches” Forex Robots, including Forex Signals with a money back guarantee, and ready to disappear in about 30 days or so.

The majority of  forex robots made-for-purchase out there are not profitable, or pretend to claim that they are profitable. If you are planning on purchasing one, please do your research first before you end up losing your money. You should know that a Forex Robot that really works can cost up to $100.000 USD and most of the time are not for sale. It’s best to be careful because it can look as a great deal by showing data mining bias in the made-for-purchase offerings.

Data-Mining Bias

Data Mining Bias is the unspoken enemy of many traders who purchase Forex Robots. Data-Mining bias is the process of ‘cherry-picking’ the best backtest out of hundreds or more, and presenting that best backtest of they many as the likely outcome for the purchaser of the forex robot. One of the leaders of this fight to make investors aware of Data Mining Bias is David Aronson.

David Aronson wrote an excellent and detailed book called Evidence-Based Technical Analysis.

His argument among many good arguments is that systems or indicators that are espoused to be best performers or most accurate predictors of future performance are likely a false conclusion. Rather, the finding of the outlier is often proven by looking at one data set and not testing that indicator over multiple cycles or environment. Please check his books if you feel that t can help you to make a decision or thinking to build your own winning FOREX ROBOT:

               

 

Successful Robots

There are successful robots out there, but one must be aware of the data-mining bias that is front and center of most made-for-purchase systems. I have tried and seen many successful systems and continue to learn more every day. Typically, these systems maintain an edge and manage risk successfully during a period of time. It depends how the robot has been built and what is the strategy used and how the algorithm performs in the real forex market.

If you are not sure, the most natural question to ask when proposed to buy a system is, ‘If it works so well, why is it being sold for such a discount or that cheap?