Forex. Trading software become more and more popular lately. I see there
are two kind of software. One shows the trading opportunities on the
chart. It can be something very simple like combination of moving
averages. Or it can be quite sophisticated based on some complex
algorithm to generate buy and sell signals. Another type of software is
the one that actually opens a trade on trader's account. Can those
pieces of software actually help in trading? Are they any threat to your
trading account? Let's discuss it in more detail.
1. Auxiliary trading software
By auxiliary trading software I mean the software that either shows the
simplified data like indicators or give buy and sell signals. It looks
like it can really simplify the task of finding right trading
opportunity so that a beginner trader can trade Forex as good as some
advanced currency trader. Unfortunately as practice shows it is not the
case. Advanced trader if he uses the software will make profit while a
new trader who is not very familiar with the market will lose his money
using exactly the same software. Why is that so? Again the big
difference is in mindset and patience to rigorously following the
trading rules.
1. Automated trading robots.
The second type of software, as I have mentioned, is the one that
actually performs trading on your account. It seems like a holy grail
since a machine does not have human emotions like greed and fear.
Therefore it should not be susceptible to trading errors that a human
trader makes due to those emotions. Again practice shows that
application of these robots gives different results for different
traders. Experienced Forex trader will test the software thoroughly
before applying to his own account. But most new traders seeing how it
performs a few trades put the software to their live account to lose
their money quickly.
What's the reason for such a different results? First of all these
pieces of software are based on some kind of trading strategy. There is
no universal trading strategy that would make profit in any market
conditions. For example a trading system that makes profit in trending
market will lose money in ranging market. Only a human can identify the
difference in market condition and adjust the use of software
accordingly.
That's why it is necessary to study market and practice your trading
skills. It will develop your trading mindset that will allow you to
trade profitably. Once the mindset is in place trading tools like
software and robots will only help you to achieve success faster.
Otherwise they will help you to empty your trading account.
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