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Forex Trading Center
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Automated Forex Trading System Robots - Why Don't They Work?
There is a new automated Forex trading system coming out almost every week now, it seems. They all show great results on paper but when it comes to live testing the story can be very different, as most of us know from bitter experience. So why does the dream turn to dust? Does the fault lie entirely with the user and the settings that they chose? Were the results faked? Or is there some obscure law of physics that says that as soon as a system is automated, the market will alter its course to stop it working? Sounds crazy I know but I've wondered about that last one sometimes and maybe you have too! I don't think it's any of those reasons, in fact. I don't think it's entirely down to the user; I don't think the screenshots were faked, except perhaps in 1% of cases; and I don't think someone up there is against us. I may be blasted for this but here's what I think really happens ... The way a Forex robot tends to come into being is this: traders take a system that has been working for them (or think up a new one and backtest it), pay a programmer to automate it, and then to cover the cost of the programming and hopefully make a lot more besides, they sell it to anyone willing to pay. The crunch comes in that first step. If a system has been working for the developer for a good long time, fine. But usually they act much too fast. They are relying to a greater or lesser extent on backtests. They know that new robots sell, so they can easily cover their investment cost on the automation, so there is really no risk in them hiring a programmer the minute they think up something that backtests pretty well. So they go ahead and create a robot. Having done that, they want to be sure it will sell. They might do a little live testing, but that's risky, isn't it! It might make a loss. They won't want to lie about the results so it might be better not to run it live, but release it to the market right away. People are credulous and far too many of them will buy on the basis of backtesting alone. Quick! the developer thinks, Let's release it now while it still looks like it works! So what's wrong with backtesting? Nothing, if you believe that future results will mirror past results. But hey, isn't that the first thing they tell you in the small print on all investment documents? "Past results are not an indicator of future performance ..." Doesn't it go something like that? And doesn't that make you think twice about the credibility of automated Forex trading system backtests? If not, consider this. You know that the odds of red winning at roulette are less than 50%, right? The zero makes it less. I think it's about 48.5%. But distribution patterns mean that if you looked at a couple of hundred spins you would probably not get exactly that many reds. You might get 52% reds for example. So what if you did that, looked at the results and said, Wow, 52% red in backtests! Cool, let's develop a robot that always bets on red ... It would lose. Sure the Forex market is a little more complex than a roulette wheel, but I believe that's basically what developers are doing when they build a robot based on backtests. And often, I think that is why they don't work. I'm not saying don't use robots, not at all. A Forex robot can be a wonderful tool. I'm just saying please pay attention to how they have been tested. Don't buy the latest robot the minute it comes out. Wait a couple of months, watch the forums and see how real users like you get along with any new automated Forex trading system before you push your money into the developer's hot little hands. Jason Cline writes on automated forex trading system software and the forex market for several websites. See what he thinks of FAP Turbo in his FAP Turbo review .
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