Best Forex Auto Trader

What is a Forex Auto Trader?

A forex auto trader refers to a program or a system that is designed to generate algorithmic trading signals that would automatically input orders in the forex market. These signals determine when and how orders are placed through a set code that is developed by the user or a third-party service provider.

Also known as trading bots, automated traders exist in any kind of market to scan for money-making market opportunities without the direct influence of the user. Additionally, using an auto-trader allows clients to passively invest with diversification and ease in mind. Using auto traders also removes the psychological aspect of trading that causes a lot of traders around the world losses due to unplanned and improper trades.

Although these forex robots are built to profit from the market, not all auto traders are consistent in being profitable. This article will show you how to select or even make your own auto trader so that you can profit from the forex market passively.

Does Automated Forex Trading Work?

Automated forex traders or forex trading bots utilize the code embedded in their system to generate trading signals to execute trades in the market. Forex signals are generally opportunities in the market that are found in the assets the trading bot handles. Signals can either be entered automatically into the market through bots, or they can remain inactive for the trader to execute on their own.

There are different kinds of forex bots, and they can either be accessed through a third-party provider, or you can hire someone to create a trading bot with your specifications. If you know how to code, program, or make your own bot through whatever means, you can even save some cash which you could use to invest in the market instead.

A lot of bots, even those provided by third-party service providers, can be modified to a certain degree. Clients can simply input their settings on the system to fit their trading style. Some of the common settings they could change include the allocation per trade-in lots or monetary value, risk per trade via stop-loss levels, holding period, target points, and the asset the bot would trade. 

Aside from the basic settings, you should identify how your bot locates profitable trading opportunities. Depending on the forex auto trader you chose or made, it would be TA-based or FA-based. 

TA is the abbreviation of Technical analysis, and it focuses on creating trades through price action and indicators. FA, on the other hand, stands for fundamental analysis, which helps in finding the future value of an asset through news analysis and economic updates. 

The strategies from the two different kinds of studies in trading are very different in execution. As mentioned, technical analysis uses price as its main determiner to enter a trade. It may or may not use indicators which are tools in knowing the trend, momentum, or volatility of an asset.

One of the most common strategies in the technical analysis used in forex is the usage of the RSI’s or the Relative Strength Index’s oversold and overbought levels. Through this indicator, your trading bot will automatically go long or buy an asset if it is oversold. Subsequently, it will short or sell an asset that is overbought.

Another way for bots to profit is to combine both momentum trading and trend following. Through momentum trading, the bot will identify assets that move out of their ranges or supports and resistances. This allows capturing a much stronger move that has a high probability of being right.

When used together with trend following, the client will not be only getting small gains but may sometimes even earn more than what they expected. Through the use of moving averages, they will ride the trend until the price of the asset reverses.

Some auto traders use range trading as a framework in creating trading signals. As opposed to momentum trading that takes advantage of breakouts, range trading is all about false breakouts and assets that are bouncing between supports and resistances. 

This kind of strategy is good for those that would want a low-risk option because the entry of orders is usually near invalidation points. Furthermore, since forex is generally a ranging market, good forex bots that apply range trading experience more success if they have a well-made strategy.

For auto traders that use fundamental analysis for forex, there are generally two kinds. One of those trades directly after breaking news, and another analyzes if a country’s currency is bullish or bearish.

Trades that come from breaking news either trade immediately after the news is published or wait a few moments for the market to calm down due to too much volatility. Usually, investors and traders that love these moves are scalpers and are satisfied with minimal gains that accumulate into big profits over time.

When using the economic data as a basis for trades to know if a country’s currency will appreciate or depreciate in value in the future, it is beneficial to use technical analysis as well. The belief or conviction in a trade is not enough because sometimes the market functions in erratic ways. To make use of your analysis and research, it is best to at least use a moving average to know whether your educated trade opportunity is backed up by crowd sentiment.

The last form of auto trading for forex is using a copy trading service. With copy trading, you will be able to follow and copy whatever trades your chosen portfolio does. This copied portfolio may be managed by a person, an institution, or another trading bot.

With copy trading, you are given the option to invest directly in a person or system by manually allocating your funds. It’s like having your own fund manager. Copy-trading provides another avenue in which you can diversify your funds even if you’re already trading forex with other systems.

Is Automated Forex Trading legal?

Forex trading when using automated trading robots is definitely legal. There is no rule in any country that prohibits you from using the service of a trading bot or even a trading signal. 

Keep in mind that even if there are some companies that offer these services illegally, clients that avail of these services is not liable. It is, however, up to the client’s discretion if they choose to use an unverified trading system that isn’t monitored by law.

If clients would want a more secure and reliable trading bot, they should go for systems that are provided by licensed financial advisors, market technicians, or reputable traders. Just remember that even legit trading bots don’t provide the profits and outcomes you’re hoping for. To further help you in choosing an auto trader for you, you could select from a list of all trading bots available and filter these choices based on profitability, strategy, or risk score.

Keep in mind that even the verified trading bots do not guarantee profits because of unforeseen market volatility. At the very least, bots available on the market only advertise the maximum amount of profit you can gain once you’ve subscribed to it. As a tip, you should stay clear of any trading bot or service that claims to surely make you a profit.

We recommend learning trading first-hand first before trying out trading bots. This way, you will be identified as scam trading bots or scambots at first glance.

How to make money with automated forex trading

To start making money using a third-party trading bot or one that you made your own, you must first find a broker that allows trading bots. Generally, forex traders would want to use brokers that are supported by the MetaTrader 4 and MetaTrader 5 platforms because both MT4 and MT5 have Expert Advisors. The Expert Advisor is a feature exclusive to MetaTrader versions to allow clients to create, modify, and use trading robots. This program can be active anytime during the trading week and can even function on weekends for assets such as cryptocurrencies.

Remember that before you can profit from auto traders, you need to test out the system you’re interested in through backtesting or using a demo account. Alternatively, you can also check out reviews of previous users of the system you’re interested in.

To use your EA, you need to first install it by opening your MetaTrader software and drag the expert advisor you want to select to one of the charts on the platform. Once your expert advisor is ready to go, all you need to do is to adjust some of the settings, which should include allocation and risk to finalize your trading bot. 

Since your trades and positions will be both opened and closed automatically by the system, you do not have to move a finger to actually earn money. However, some applications allow the manual closing of trades when clients think it’s the best move to make.

All of your position will appear in either your portfolio or trading history. A list of your current realized, and unrealized profits and losses will also appear on your platform for easier tracking and monitoring of trades. Once an open position’s asset hits the target level or the take profit level, it will automatically close a trade, and you will be given the corresponding profit of that certain trade.

Automated trading by using copy traders has an easier process. Aside from having enough cash in your account, all you need to do is to select the portfolio of traders you’re interested in copying and allocating a set amount for that strategy. Sometimes, you will be given the option to copy only future traders rather than both open and future trades. 

What is the best-automated trading platform?

The best-automated trading platform is the MetaTrader, specifically the MetaTrader 5. The MT5 is better than its predecessor, the MT4, because it’s faster, more efficient, and has more features.

However, users of the MT4 are still satisfied with the service they get because it’s enough to have everything you need in auto trading despite being an old model. Some beginners may even prefer to use the MT4 because it’s simpler and easier to use.

Starting in 2005, the MT4 has been able to let client integrate their brokerage accounts seamlessly into their programs, and this feature has also transitioned to the MT5. This way, interested automated trading clients can easily access their accounts without needing to create new ones.

Additionally, MetaTrader has a marketplace solely for Expert Advisors that act as trading robots. You select from a long list of bots, or you could create one to sell or share with the community. Keep in mind, however, that the programming language of the MT4 and the MT5 are different and thus require different codes for the bots you’re interested in.

Best Online Forex Brokers

There are tons of forex brokers out there that advertise groundbreaking services and features, but only a few really stand out from the crowd. We listed some of our favorites below as well as why we like them.

For copy trading, we recommend eToro because it’s easy to use, and they also offer a wide variety of assets. With their user-friendly interface, they make it easy to invest and choose your method of investment, whether it’s through copy-trading or making your own manual trades.

TD Ameritrade deserves mention because of its excellent trading platform. Through their proprietary trading platform, Think or Swim, you could perform backtests on any time frame in past market conditions. 

CMC is another broker that offers a lot of currency pairs, and they probably offer the most pairs out of any broker. They also have the best web-based platform for those that wouldn’t want to install any software.

Brokers such as Pepperstone, IG, and Interactive Brokers are those that take the top spot on our list. They all have competitive spreads on all their assets, and they have a great all-around platform that would suit any kind of trader.

Should I use forex auto traders?

There are many reasons why you should use auto traders. This is especially true for those that don’t have enough time to do research through reading news or plotting price points on charts. Auto trading removes the hassle of preparing, entering, and exiting trades and all that you need to do is to select a good Autotrader and set the amount of investment you want to put in.

Using bots to trade frees up so much time for the regular investor. This way, you could enjoy the hard-earned money you gain passively or even spend time with your families.

Forex auto traders are not only exclusive to forex traders but they could be used by those that trade other assets like stocks or indices. Thus, this opens up the option for diversification for your portfolio.

Selecting the best Auto Trader for you (risk score, profitability, strategy)

An easy way to select an efficient and profitable auto trader is to either read reviews of other people that have used the product, or you can also test it out yourself through backtesting or using a demo account. Some brokers or bot providers also offer data such as risk score, profitability, and drawdowns for each of their bots for you to filter out which one suits you best.

Aside from what’s mentioned above, there are a lot of different reasons why one bot is better than the other. For forex, some bots only trade major currencies. If you want to have a more diversified portfolio or if you want to capture more opportunities, you might want one that has access to your preferred assets. 

If you’re interested in other asset classes as well, it is best to check if your chosen bot trades other asset classes or derivatives of forex. There will be times wherein a bull market in stocks would have better profitability as opposed to regular forex market conditions.

Your auto trader should also have low or reduced latency. Since bots function by looking for the best opportunities at a certain point in time, being the first in a trade, especially when there is an important economic event, would allow you to purchase or sell a certain asset at the best price available. This doesn’t only apply to opening positions, but it also affects the closing of positions through either hitting your target points or invalidation levels.

The bot you choose should also be compatible with your broker. Most of the bots available in the market are in the form of EAs or Expert Advisors, which only work on the MetaTrader Platform. Also, having a fully functioning interface that your broker should offer is a big plus in monitoring and analyzing your current positions in the market.

Tips on making your own auto trader

To make an auto-trader that is both efficient and profitable, you must first learn how to be profitable yourself. Knowing when to go long or short on a certain asset greatly affects the trading rules of your created robot. If possible, you can also view the systems of other trading robots in the market to know why they are successful.

In forex, where spreads are a big thing, especially when using leverage, it is best to only select assets that give you the least loss when traded. This means that your auto trader should only trade major currencies, or if you have a bigger risk appetite, you can add minor pairs to the mix. That way, your losses are minimized, and you also get to capture the volatility on the most traded pairs. 

Keep in mind that more assets to choose from don’t necessarily mean more profits. Although there are more opportunities, some forex traders and bot users prefer to only trade a few pairs, such as the EUR/USD and USD/JPY. This is so that they keep their drawdowns to a minimum, but at the same time, they are saving up cash so that they can trade only the best assets available.

Depending on the platform you are using to create and use your trading bot, you can even customize the time when your auto trader activates. This is to avoid stagnant market movement that may come from the lack of participates. You can set your Autotrader to turn on during set market sessions such as the Tokyo session or the London session to trade JPY and GBP pairs, respectively.

Clients of auto traders, like live traders, should also keep track of their risk management strategies in both calm and volatile market conditions. Risk management is one of the, if not the most, important factors when trading. Through these strategies, your losses are kept to a small amount so that you can keep on trading while easily winning back the money you lost.

We suggest only risking a percentage of your total portfolio in every trade so that if a trade does go wrong, it will not eat up most of your capital. In managing risk, modifying the amount you’re willing to lose is not the only option, but for some auto traders, you have the option to change the maximum percentage loss of every asset your bot trades. Alternatively, clients can choose to change their allocation such that they would only lose a percentage of their account.

Once you’ve finished making the initial version of your forex trading bot, the first thing you should do is to try it out using a demo account. If you use a live account as soon as possible, you might run into a few errors, or even worse, you might experience large drawdowns because of mistakes in the code or settings of your system.

When using a demo account, it is important to keep track and keep note of all the settings you’ve put in place and if your trading bot does exactly what you tell it to do. Also, monitoring your portfolio by using analytics can take your trading system to the next level. Knowing how to minimize losses, maximize gains while being efficient with your capital is the way to improve.

If you want to save time, you can opt to use backtesting software instead of letting your trading bot trade using a demo account. Through backtesting, all you need to do is to input your system onto the software, and you can let it run and simulate past market conditions. You can test it out in both favorable and unfavorable circumstances to know where you can improve your bot.

Data such as percent win rate, average gain and loss, and drawdowns are important numbers that you need to analyze to know if your bot has room for improvement or not.

As mentioned, drawdowns are an important factor to take into consideration. Even if you’re losing only a percentage every time you make a trade, multiple losses would make a dent or even destroy your portfolio over time. To remedy this, you should either stop your trading bot manually or set a condition wherein your auto trader stops automatically.

There will always be times where your trading bot will not perform the way you want it to. This is due to market conditions that are unsuitable for the trading bot.

Aside from stopping the bot from working, you could also look for the source of the problem, which could be your own system or even the market. If you have the opportunity to edit out your system, it is best to do it as soon as possible so that you can still take advantage of the next trading days with a higher success rate.

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