In the quest to maximize returns from trades in the forex and cryptocurrency market, traders are increasingly automating their activities. Also, automation enables traders to exploit price movements and market shifts even when they are asleep. As such, the demand for forex robots is quite high.
Types of forex robots
The ultimate goal of forex robots is to facilitate the generation of higher profits by traders. However, the systems differ in how they achieve the goal. According to this study, there are three types of forex bots. The first type is a system that relies on in-depth technical analyses. Notably, the most deployed technical analysis technique is regression analysis. Such systems mine data and process it to identify and report the relationship between asset prices and multiple factors.
The second type of forex bots is those based on textual analysis. Mainly, textual analysis is a technique that focuses on information coming from news about the forex market in general or particular currencies and currency pairs. The trading systems incorporate news in their algorithms such that the trader can gain a competitive advantage. Notably, the fundamental difference between the methods based on technical analyses and those based on textual studies is the kind of data used. For the former, market data is the most crucial, while text data like the news is essential for the latter.
Lastly, there are forex expert advisors that rely on high-frequency trading. Such systems are high speed and are ideal for day traders. They exploit pricing inefficiencies in the market as well as fleeting liquidity imbalances in the forex market. Notably, traders who use such systems have no intention of going long on trades. Often, they want to enter and exit a position in a matter of minutes.
Having this background in mind, how do you choose the best expert advisor? In this article, we will go over specific factors to consider before selecting a particular bot. Besides, we will discuss the characteristics that define the best bots and give examples of the bots that you can rely on to make your cryptocurrency trading experience more profitable.
First Tip: Search Independent Reviews Online
You are unlikely to make any mistakes if you begin from a position of strength. Gaining this advantage starts with a little education about expert advisors, how they work, and why you should use them instead of going manual. However, this information is not enough to point you to the best forex robot out there. Why? There is a myriad of bots flooding the internet, which promise ridiculous returns without any effort from you.
Nonetheless, looking for online reviews of the target bots is crucial. The best bots are those that many traders use, meaning that there is a lot of feedback about the bots online. You can visit sites like this one where users give reviews for various software.
Second Tip: Understand the Statistics of the Forex Bot
Having read the reviews and have educated yourself on the whole concept of trading bots, it is time to understand the crucial statistics that define an expert advisor. Usually, third parties or even the developer of the software themselves test the bots and provide the results for all to see. These backtest reveal how the robot performs based on several statistics that include profit, expected payoff, and drawdown.
It is vital that you understand the statistics to be able to select the best trading bot. For instance, the bot must be able to generate positive returns for every trade strategy. Notably, the profit factor shows the relationship between profit and risk. Usually, higher risk generates higher profits. Therefore, you should always settle for bots whose profit factor is more than 1.
Other crucial statistics that you should look out for include the expected payoff and the drawdown. The expected payoff is an anticipation of the amount you can earn for each trade on average. On the other hand, drawdown gives a glimpse of how the bot performs when under the pressure of the risk of losing a trade position.
Third Tip: Consider Carrying Out Tests on the Bot by Yourself
Not all tests posted on the internet are genuine. Some of them could merely be marketing gimmicks aimed at misleading prospective users. As such, we would advise you to carry out your tests on the expert advisors.
In testing the bot yourself, you will achieve two objectives. First, you will confirm the performance of the forex robot based on the statistics discussed above. Second, self-testing of the bots will help you to understand how different bots work. In the end, you will be able to choose a bot based on the ease of use and its ability to fulfill essential benchmarks.
Fourth Tip: Understand Your Priorities
As discussed earlier, there are different types of expert advisors. Each type operates in a particular way and achieves different objectives. Therefore, you must be clear about your priorities. This way, you will be able to choose easily the kind of bot that you need.
Never less, as you look for the best bot, there is a truth that you must accept. The truth is that no one expert advisor has all the answers to your needs. Instead, different bots focus on different objectives. For example, you can get a bot that is excellent at the profit factor but very poor at drawdown.
Expert advisors are ubiquitous in the forex and cryptocurrency markets. It is because they facilitate the earning of high levels of profit. Besides the profit factor, the bots have made it easier even for novices to trade successfully. However, you must ensure that the bots perform satisfactorily against specific benchmarks like the profit factor, drawdown, and expected payoff before settling for the bot.