Trading in the manual mode, even with the best strategy, requires a completely active participation from the trader in order to constantly analyze the market conditions, to predict them and of course, to take decisions in the direction of generating profit.
It's not the only way of trading
There are some other options available that do not take so much of your time and concentration, since it takes some effort to teach the software with the ability of running itself and develop the necessary trading orders. We are talking about Forex advisors.
A Forex advisor is a software that professional traders develop based on a trading strategy they use in manual mode. Therefore, the reliability and the efficacy of a determined advisor will depend almost completely on the adopted FX trading strategy and on the trading experience of its creator.
When someone hears about Forex advisors for the first time, what immediately comes to their minds is the possibility of making money without investing time. It sounds too good to be true, but actually that's how it is sold sometimes; of course that needs to be questioned.
Independently of how disposed you are to let an automatic trade program administrate your money, it is interesting to know how advisors work and based on what. In this article we will make an approach to it.
Types of advisors
- There are those that work as completely independent robots, where all the trading activity is delegated to the program. The trader has nothing to do but determining the extent of time in which the software is going to operate.
- On the other hand, semi-automatic softwares will provide tips to the trader about entry signals and price recommendations based on risk management, but won't execute any action without the trader's confirmation.
- There is another type that will not only help the trader to establish the price range for executing a profit or a loss, but also is able to set up various orders at a time. These are Script helpers.
Other classification exists, based on the transaction form and chosen Forex trading strategy. That means, the human traders must know very well the aim of their transactions, their trading style and risk tolerance in order to correctly pick which type of advisor will benefit them the most: Whether a long or short term, a multi-currency or a combined one.
Indicators play a major role
In manual trading, a great analysis derives from the correct interpretation of determined indicators. An advisor works the same way; it weighs up the market conditions through the evaluation of crucial indicators for posterior prosecution with a suitable trading order.
To get an order open, the program must receive a series of signals from the indicators that will tell if one of the price range limits has been reached, or which is the same, whether a trend with no reversal has taken place or not.
Strategy: the main character
It is widely proven the efficacy of basing a Forex advisor on a single Forex trading strategy. But take into consideration that it doesn't mean that the chosen strategy is foolproof and logical, be aware that it will have consequences on the trading results. This is why we would recommend you to base your first robot on 1 minute Forex scalping strategy.
With Forex advisors the trader has the advantage of calculating the margin of an error, which will mostly derive from the strategy chosen and the possible deficiencies on the software development.