Automated Trading Software (ATS, sometimes referred to as expert advisors or trading robots) is getting more and more popular among Forex and stock traders. The idea of using a trading robot, which makes trading decision on its own basing on a certain predetermined trading algorithm, looks tempting. However, the experts of warn that traders may encounter numerous problems when using such software.
Problem 1: Back-testing VS real-time trading
A lot of trading robots sold online show outstanding back-testing results. However, nobody can guarantee that its real-time performance will be as good.
According to Yuri Zaytsev, a programmer, the winner of several automated trading contests and the head of the Department of Automated Trading (), most of those trading robots are made by programmers (not traders) only to make money selling them.
They just take some historical quotes for any currency pair or stock, back-test some trading strategy and keep changing settings until they get outstanding performance. They make a screenshot and sell those robots to “Holy Grail” hunters. However, those robots are useless for traders as sooner or later they start losing their money.
How to tell a good trading robot form a fake one? First of all, it is necessary to talk tothe programmer who created the trading software you are interesting in and ask the following questions:
· Which trading criteria is the software based on? (including the criteria of switching from flat to trend and back - you can find free tips at ’s tuition-free school for beginners)
· Why does the software work only for one or several currencies?
· Has the author (who is supposed to be a trader and a programmer) ever made any discoveries in trading and what is the essence of the trading system behind this software?
· Has he/she ever participated in any automated trading contest and what are the results?
· Don’t forget to browse the web for the feedback
Most of those who sell those “Holy Grail” trading robots, will find an excuse to not sell them to you because they will understand that you are not an amateur looking for some quick and big profits.
Problem 2: Trading robots VS brokers
A lot of brokers impose restrictions on automated trading software. As a result, they may refuse to pay the earned profit and cancel those trades. Is it possible to avoid numerous pitfalls of automated trading?
Basing on Yuri and his students’ experience, it is possible to conclude that brokers have a lot of ways to “control” profitable software. For example, brokers and dealing centers may block the software from accessing the trading terminal and server at any moment, they can even change the settings. They can ban a trader (or a group of traders) form using automated trading software. And finally, they can cancel a trade if it is a winner.
Brokers may find a lot of excuses to ban a super-profitable trading robot and to cancel all winners. For example, a successful trader from made $20.000 with IKON Group using his trading robot. However, IKON Group refused to pay the $20K profit, saying that the robot had been making arbitration transactions.
We also managed to interview the representatives of some brokers on the matter:
Alexander Yalin, Chief Analyst at FreshForex: “ Our company doesn’t impose any restrictions on automated trading software. However, it is crucial to setup your software so as not to contradict our regulations and trading conditions”.
Andrei Goilov, RoboForex: “USE ROBOTS –TAKE PROFIT, this is the company’s slogan. We specialize in providing comfortable trading conditions for automated software users. No restrictions”.
Vera, ICMB: “Using trading robots is a benefit, both for a broking company and its clients. For example, at NYSE most of the trading is done by robots. As a result, brokers get more volume and bigger profits. That is why our company approves and encourages automated trading. Moreover, our experts consult our clients on the specifics of automated trading with ICMB”.
Pavel Platonov, TeleTRADE: “it is all about the principle of operation of a certain trading robot. Automated trading software is allowed but it should meet the company’s rules regulations.”
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
What is your attitude towards trading robots? Do you use them in your everyday trading?
