Brokers use them because they drastically reduce the time needed for market analysis and allow them to profit from small price movements that would otherwise not be possible on such a small scale.
It is beneficial in the ever-fluctuating world of forex, where even a 0.1 pip difference can make or break your daily earnings. If you’re looking at the difference between $500 and $1000 per day, it’s easy to see how cents can add up.
Forex robots also automatically implement some trades: no human intervention is required after setting specific criteria (such as trend strength), which means there is no need for brokers to monitor their clients’ trades.
The reason brokers would want to use forex robots has less to do with themselves and more to do with their clients. The market often moves at frictional times due to large orders on either side or stop-loss orders (whereby, if reached, the trade will automatically close).
Because of the way these work, brokers have opportunities to make money, specifically when heavy volumes are hitting the market. It doesn’t just happen once or twice a day but also at random times.
Allows brokers to provide higher quality more effectively than manually
Using automated robots allows brokers to provide higher quality and more efficient services than manually. Forex transactions that were once only available during business hours can now take place around the clock seven days a week as an international network is established automatically.
Because every interaction with customers is recorded and organized by computers, those conversations can happen any time without taking employees away from their work. It also means greater flexibility as tasks such as marketing or evaluating new markets can be completed quickly and more frequently at minimal expense.
To make more money
Perhaps one of the best reasons forex brokers choose trading robots over regular workers is that they are much more likely to make money. Any skilled broker can make well-informed decisions that lead to profitable trades. However, no forex trader has a success rate that exceeds 85%. It means that if brokers are accurate 70% of the time, they are losing money overall because those incorrect predictions are too common to make up for the losses.
Trading robots remove this issue as they trade with data from millions of sources, including pips signals and economic news. Instead of making educated guesses, trading machines conduct automatic transactions at preselected times or once certain conditions have been met, thus eliminating any potential mistakes.
The technology behind forex robots
The technology behind forex robots has been around since the mid-’90s. It is constantly being developed and perfected, but the core premise remains the same: find patterns in market data to predict future movements and capitalize on them.
There are many types of automated trading strategies, but they all boil down to these basic principles:
- define a set of rules based on variables such as time, price, or volume; design an entry strategy (i.e., when should we enter?);
- design an exit strategy (when should we close our position?);
- select the currency pair you will trade;
- backtest simulations over at least three years using historical data;
- check how profitable the strategy was;
- if it’s not profitable, rework your algorithms and rerun simulations;
- when you’re satisfied with the results, start trading for real.
The main advantage of forex robots is their efficiency
Depending on which testing method you use (paper trade or backtesting). It can help you determine an appropriate balance between low-risk and high-return trades that would take years to figure out with manual trading. It allows you to maximize your profits without exposing yourself to excessive risk.
Even though it’s obvious why brokers use forex robots, remember that there is always more than just one benefit to every decision you make in life. It may not be immediately evident why you would want to or need to buy a robot, but whatever the reasoning is behind your choice, you will likely find success and happiness by following through.