Don't believe all the hype about Forex trading software that will make you millions while you sleep, because there are many hidden dangers involved with using such programs to trade your capital in the currency markets. There's not a day that goes by that I don't hear about some unsuspecting new trader that gets burned badly because they weren't aware of the risks involved, and made some serious mistakes. It breaks my heart to see dreams hindered or even dashed like that, when such mistakes can easily be avoided should you recognize the risks and dangers upfront.

Hidden Dangers Of using Forex Trading Software

Obviously, there's always the risk that you buy a Forex trading software program that turns out to be a scam, but that can be avoided by only buying a "guaranteed" system and by checking and double checking reviews from reputable sources before you buy. This is clear for most people to see, so I won't get into it in this article. What concerns me is what people do after they buy the system, especially when they're "blinded" by the promise of easy riches and push button simplicity. Heck, most traders don't even read the manual before putting their program to work!

The first danger of any Forex trading software, especially fully automated systems, is that the risk settings are too high to begin with. Many developers are designing their systems with astronomical risk levels, often risking 5-10% of capital on a trade… and sometimes even more! That's crazy, and it's no wonder that people end up blowing up their accounts and wondering why. Additionally, you should check that your leverage levels in the Forex brokerage account match up to the recommended system parameters, otherwise that's another time bomb waiting to explode.

The Biggest Forex Trading Software Liability

Another hidden danger that's not so obvious in the short term is your own mental and emotional factors. While people often say that using automatic systems is a good way to eliminate emotional trading, it's inevitable that your emotions will still get involved. For example, traders often get "cold feet" after a few large losses, and start second guessing their trading program or even abandoning it entirely. Or, they get too excited when the big wins start piling up, start getting overconfident and doubling/tripling their risk… only for the market to turn and destroy all their gains and then some. Whatever the manifestation of emotions in trading, it's clear that you need to manage it just as much when you're using Forex trading software as with any other form of trading.

Like you, the first time I encountered automatic Forex trading I dismissed it as a scam that would "never ever work in real life". And to be fair, a lot of systems out there are actually flat out a waste of your time and money. That said, there are a growing number of legitimate systems out there, and I'm not just saying that, I know that having experienced it for myself. So, if you're still skeptical about automated systems in general, here are some facts that will help you to make an informed decision like I have.

The Facts About Automatic Forex Trading

If you think about it, most trading decisions can be quantified and formed into specific "rules" which can then be used to repeat the decision making process. Basically, if a wise old trader wanted to teach an apprentice how to trade, then he or she would simply formulate their own trade decision process and guide the novice through each step of the way. Automatic Forex trading is no different, except in this case the rules are programmed into a piece of software to be executed when the situation and timing is right. The bottom line for any system is therefore not so much a matter of whether such a thing can work, as how good the rules and programming actually is.

Obviously, of all the systems that there are out there right now, there are many that don't have good rules, good programming or some combination of both. That's where many automatic Forex trading programs fail miserably, and some people go so far as to knowingly fabricate and sell dud systems to con people. After all, the entire industry is extremely profitable for educators and brokers alike, so there's no shortage of unscrupulous people trying to get in on the action as well. That said, that doesn't mean that there aren't good, honest systems designed by good honest people that actually work out there. They are just harder to find.

My Personal Recommendations When It Comes To Automatic Forex Trading

I'm not going to do like many others do and personally recommend any system that's out there today. All I can say is, you should be very skeptical about the claims that anyone makes about their own system, because they have a vested interest in selling it to you after all. When it comes to automatic Forex trading, you should go the extra mile in testing and verifying the supposed profits for yourself, and be very careful with your capital throughout the entire process.

It seems like people are jumping on board with a very radical solution to their trading woes by building their own automated Forex trading software programs! If you're considering whether it's a wise move to try to build your own automated currency trading system, there are a few things that you should consider before you take the plunge. Here are a few of the main considerations you should take on board before committing yourself to any serious development project.

What's Involved In Building Your Own Automated Forex Trading Software Program

I've personally developed dozens of profitable and not so profitable automated Forex trading software programs, so I daresay I know a thing or two about the entire process. If you think it's just a matter of throwing a few indicators together and saying "buy when X" and "sell when Y", then you're very much mistaken. In fact, you've probably heard from a couple of "gurus" that you should keep combining different indicators and backtesting each unique blend until you find a winning formula.

Well, the problem with that approach is, that ultimately you're going to find a winning combination that would have worked magically in the past, but will it work again in the future? You can never know for sure, after all people do win the lottery every week, and who's to say that your automated Forex trading software program hasn't stumbled on an extremely lucky combination that would have made you millions trading "past data"? That's the flaw with testing random combinations, and I can tell you from experience that these systems don't last more than a week in real trading.

So Is It A Good Idea To Build Your Own Automated Forex Trading Software Program?

You might be surprised, because I do actually think that it's a good idea for people to build their own program… but only if they have a lot of experience trading and are wiling to dedicate their time learning how to develop that prior knowledge into a working trading system. That's because an automated program will allow you to free yourself from actually having to do the trading, and eliminate your emotion from the process as well. That said, if you're new to the markets and don't have much experience trading then it's a really bad idea. That's because you don't really have any experience or solid knowledge in either skill sets for developing a profitable automated Forex trading software program, and therefore you should give this route a miss.

There's a new wave of "adaptive" automated Forex systems hitting the market right now, and they're trumpeted as the new "breakthrough" that will solve all the problems that their predecessors had. Basically, instead of having one set of rules that dictates the buying and selling of the particular currency pair, it "adapts" based on the market movements in order to better model the price behavior and beat the markets. Sounds like a good idea at the face of it of course, but is this really an improvement on previous models? This article aims to explore whether adaptive systems are better than static ones.

The Idea Behind Adaptive Automated Forex Systems

The idea behind adaptive automated Forex systems are pretty simple – since the market is dynamic, the rules to trade the market at any given time should be dynamic as well. Therefore, instead of having just one rigid set of rules for the automated Forex system, there's a much more complex algorithm to try to model the underlying market and react to changes by adapting the rules. In other words, the program tries to "learn" and "adapt" based on the ever shifting market conditions to deliver a superior trading result.

While all of this sounds very simple in theory, it's much more difficult to implement in practice. First of all, market modelling isn't an exact science. If it were, then you wouldn't need automated Forex systems at all. You would just trade based on those models. That means that every model is an approximation, and any adaptive system is adding even more complexity by trying to apply "continuous modelling". In short, while the idea to be adaptive is commendable, it doesn't come off so well in practice.

So Are Adaptive Automated Forex Systems Any Better Than Static Programs?

That's the big question when it comes down to it, and the answer, in my opinion is no. Even if the system can actually adapt, it remains to be seen whether it can adapt quickly enough, and not be overly sensitive to minor fluctuations at the same time. And considering that in our brains we have one of the best learning systems known to man today, computers are still light years away from coming close to having that same adaptive function. Therefore, you're actually better off with static automated Forex systems right now than any adaptive or so called "self learning" program in the market.

There are many developers out there that are trumpeting their automated Forex trading system as the be all and end all of your investment needs, but the truth is that it is only one part of a very big puzzle. If you're working full time and have commitments outside of work to attend to, then the last thing you need is another activity to keep you glued to the computer for hours after work. And while an automated trading program can help you to avoid that, it's not as simple as flicking a switch and watching the cash roll in. Here are 3 keys to making your system a success.

Keys To Successful Automated Forex Trading #1: Capital Management

Starting with enough capital to survive the ups and downs of a trading operation is the first and most important key to ensuring that you turn a profit at the end of the day. If you have too little capital in your account, a bad string of trades will wipe you out, and cause you to miss out on the profits you would have eventually made. You should test your automated Forex trading system on a demo account and consider the loss profile before making a decision about how much capital you will need, as every program has a different profile and requires different levels of starting capital to keep you safe.

Keys To Successful Automated Forex Trading #2: Money Management

The next most important ingredient in successful automated Forex trading is money management. Obviously, you don't risk all of your capital in one trade, but how much of it should you risk to minimize your losses and maximize your gains? Good money management answers that question, and generally the rule of thumb is that you risk only 2% of your capital in any given trade. You can set your trading position size within the system to adhere to these limits, and you should update it often to ensure that you stay safe in the markets.

Keys To Successful Automated Forex Trading #3: Emotional Management

The most important part of trading successfully is how you handle your own emotions. Discipline and patience is the key here, so it's best to start out with the attitude that you're in this for the long run… not just for a quick buck. If you have a long term view, it's much easier to put the day to day wins and losses in perspective. Most importantly, understand that your automated Forex trading system is a software program at the end of the day, and therefore is not perfect.

Do you have the right Forex trading software at your disposal? Maybe you didn't know this, but not every trading program was created equal. They range from fully automated, to partially automated, to really basic. So how do you determine which of these are best for your trading needs? Before you invest any of your hard earned money into any of these, you owe it to yourself to get informed about the many different types of software out there, don't you think?

The Different Types Of Forex Trading Software

As I mentioned, there are 3 types of Forex trading software available to support you in your trading. The first of these is the charting program, which basically allows you to display price data in an organized fashion and comes with a whole range of popular indicators like moving averages, MACD, RSI and so on. You may be surprised when I tell you that such a basic package doesn't come cheap, because depending on the data provider you sign up with, you may be charged anywhere from $100 to $5000 a month!

Instead of signing up for such an expensive software subscription service, you're far better off signing up with one of the many Forex brokers that supports Metatrader 4. MT4 is a charting and order placement platform all in one, and when it's plugged in to a compatible broker, it does everything that a software subscription service does. Best of all, all this data and functionality is provided to you by the Forex broker for free! So you get to save your money for trading instead of paying for data and licensing.

Automatic Forex Trading Software Variations

Not only is Metatrader 4 a platform for charting and order taking, it allows you to run pre-programmed trading systems and even create your own! So if you're new to trading, you don't have to learn how to trade from scratch because you can just literally copy someone else's trading by using such programs. When it comes to automated Forex trading software program, there are two options available to you: fully automated and semi-automated. 

Basically, a fully automated system will do everything for you, from entering and exiting the trades, to managing the trade for you minute by minute. It's ideal for busy people who don't have time in front of the computer. Alternatively, if you prefer to manage your own trades, you can get a semi-automated system that tells  you when to enter the trades, and you can manage the rest of the trade for yourself. Whichever option you choose, there's no question that Forex trading software is a huge shortcut towards your ultimate goal of achieving financial freedom when it comes to trading currencies.

When it comes to getting the winning edge in the currency markets, there's nothing closer to the holy grail than automatic Forex trading systems. You may have heard lots of "pro" traders claim that the only way to make a substantial profit in the Forex markets is to dedicate your life to learning the art, and perhaps that is one way of doing it, but it's certainly not a viable method for us "normal" people. If you have a job and aren't about to quit it to gamble your future in foreign exchange trading anytime soon, then this article is for you.

Why Automatic Forex Trading Is The Holy Grail

In trading circles, the "holy grail" is another way of describing the perfect trading system. There's many different ideas about the holy grail out there, but in the context of what we are talking about, I really do believe that automatic Forex trading is the perfect trading solution for you if you hold a full time job and want to make a side income in the markets at the same time. That's because it literally eliminates the need for you to be physically present to buy and sell the desired currencies, and it completely automates the entire process from start to finish.

The alternative to automatic Forex trading is to spend every waking moment outside of work in front of the computer trading the markets. Don't be fooled, currencies may move by fractions of a cent each day, but in the units of "pips", a very liquid pair might jump two or three hundred units in a day, and even more if there's a big announcement that's just been released. That means you can never afford to take your eyes off a live trade to sleep or work, as the prices may be far, far against you by the time you get back.

The Benefits Of Automatic Forex Trading To The Busy Trader

Not only does automatic Forex trading take away the need for you to be physically present to execute and manage all of your trades, you also get the added benefit of discipline and experience in the markets. Systems are pre-programmed by experienced pros with significant knowledge about the markets, which means you get a proven set of decision making criteria in built into your software. And because it's a software program, you have the benefit of consistency and discipline. The system will continue making trades the exact same way based on the programmed parameters regardless of whether it is winning or losing, which is more than what I can say about any human trader. So is there any reason why you shouldn't tap into the power of automatic systems right now? Definitely not, so do your research and find a good automatic Forex trading system that fits you today.

One of the biggest myths in the Forex markets today is the existence of automated Forex trading software programs that can "predict" market movements and henceforth deliver a tidy profit to your trading account. Well I'm sorry to burst your bubble, but no one can predict the future, and that extends to automated systems as well. After all, even the best minds in the world cannot predict natural disasters, economic decisions and special events around the globe. All of these factors affect the markets, so if you can't predict them you certainly can't predict market movements.

The Myth Of Predictive Automated Forex Trading Software

Want further proof that "predictive" automated Forex trading software is a myth? The fact is, even if any automated Forex trading software could predict what would happen in the market, the simple act of following those predictions will disrupt the balance of trading and nullify the predictions. In other words, no perfectly modeled system can remain perfectly modeled because the simple act of becoming a participant of the system will disrupt the modeling. This simple truth reinforces the fact that automated systems cannot in fact predict the market!

How Automated Forex Trading Software Wins Without Prediction

The truth is that profitable automated Forex trading software does not in fact need to predict market movements to make money! Successful software programs rely instead on replicating good decision making in situations where there is a higher probability of profit than usual. A good analogy of this situation in play is the phenomenon of card counting in the game of blackjack in the casino. Normally, the game favors the casino, but in special circumstances where the deck is "loaded" with favorable cards the player has the advantage. In the same way, Forex trading generally doesn't favor the trader, but in special circumstances you can get the edge.

With that in mind, forget any system that claims that prediction is possible because it's very likely that it's a scam. After all, if someone lies to you once to try to convince you to buy to their system, can you really trust them? Of course not! Instead, look for programs that explain the true process to you and how they get the edge in their trading. If you can find a piece of automated Forex trading software that allows you to do just that, then you will have a potential gold mine on your hands!

One of the biggest causes of failure in automated Forex trading is not having enough capital to begin trading with. It's easy to be sucked in by claims that so and so turned a hundred dollars into ten thousand dollars in just a couple of months, but the reality is that aside from a huge amount of luck, there's really no way that anyone can actually do that in real life. You need a significant amount of starting capital to begin trading properly, in addition to a healthy attitude towards minimizing risk. Here's what you need to know to keep yourself out of trouble.

The Best Money Management Practice For Automated Forex

In automated Forex trading, it's extremely important that you understand the right application of money management and risk management before you even turn on your system. That's because this is a key parameter in the operation of any system, and normally the default money management settings given to you will be too risky. With high rewards come high risk after all, and the developer would have ramped up the risk to create the big numbers on the sales brochure to entice you to buy.

Contrary to what most traders think they know, the key to success in Forex trading isn't how much money you make, but how much money you keep. To retain the maximum amount of profits, and protect your capital at the same time, the first thing you need to do is start with enough money. Every Forex broker account has a minimum lot size, and every system has a minimum risk, and you need to be sure that your starting capital is enough to cover both these amounts. Otherwise, you're risking more than you have to and that will almost certainly blow up your account.

Automated Forex Money Management Rule Of Thumb

Here's my personal money management rule of thumb that I use in automated Forex system trading. First of all, you calculate the maximum possible loss in pips that your system can have. Next, you multiply that figure with the minimum position in dollar value that your broker allows you to take in any given trade. The figure you get is the maximum possible loss in dollars that you can possibly have. The rule of thumb is that you should only risk a maximum of 2% of your capital in any given trade, so to get the minimum starting capital you need for your automated Forex system, all you do is multiply your worst possible dollar loss by 50 and you have your figure.