The Forex market has some hidden secrets, with one of the biggest ones being the Robot trading phenomenon; these Forex Robots use mathematics and computer programming that are based on past trends in the market to trade on the Forex market.
There is a big problem with Robots, because no matter what you have heard, they do not work!
Of courses there are those success stories about how a friend of a friend made $200,000 in a few days after beginning with $10,000, but these stories are egregious exaggerations and scams. This is hype that is based upon historical trading that is ‘hypothetical’.
It is a known fact that the majority of Forex traders that use Forex Robots actually lose money.
It is true that Robots have false risk management rules built into their systems, which is why they lose money.
The Robots target small, fast profits – between 3 and 9 pips. After several trades, the Robot will have a high winning percentage, as much as 85% or 95%.
However, they are extremely flawed in the end, because their reward-to-risk ratios and stop losses are out of sync, meaning that you might be risking $10 dollars, just to win $1, which is not a smart bet. This is called ‘sucker betting’ in gambling and guess who is the sucker!
This is the reality of the situation: even one trade can negate the profits from a whole bunch of the high winning percentage trades. The losses, however infrequent, are so large compared to the small returns on the win, which is why it is so easy to lose money.
There is an inverse relationship between the reward-risk ratio and the percentage of winning trades. There is an inverse relationship between winning trades and reward ratios, meaning the higher the reward ratio, the lower your winning trades percentage, and vice versa.
Thus if a Robot has a high percentage of winning trades, of say 90%, the reward to risk ratio may be as low as 1:10.
Honestly, winning percentages should not be your focus, instead, attempt to manage your risk by maintaining a reward-to-risk ratio that favors your odds.
View this video to see how you can change your Forex trading for the better: