There has been a lot of buzz lately about automated Forex system trading. It seems that a new Forex system that runs on auto-pilot is introduced every week. I make a living trading Forex so I'm always looking for new Forex systems that can make consistent winning trades, even through volatile economic conditions.
If you want to be successful and make money in automated Forex system trading, here are the top 3 things you should look for when evaluating this type of software:
1) How Does The Software Perform On Historical Back-tests?
Automated Forex trading software integrates with trading platforms like MetaTrader 4. Historical testing can be performed to simulate the trades and decisions the Forex software would have made against historical foreign currency exchange data. This can be a reliable indicator as to how the software might make trades in a live account.
An important statistic to look for in your back-test results is the win to loss ratio. The win to loss ratio will tell you how many times a winning (profitable) trade is made in proportion to how many times a losing trade is made. For example, if the automated Forex system made twenty trades, and 15 of those trades were winners, and five were losers, your win to loss ratio would be 15 to 5. This is also known as your hit rate; the software made 75% winning trades.
2) What Is The Performance Of The Software On Forward Tests?
Forward test performance is even more important than back-test performance. In current market conditions, does the software perform well and make profitable trades? If the Forex software does not perform well under live trading conditions, back-test results are generally meaningless.
Made available by most Forex trading brokers are demo accounts, where you make live trades but don't risk real money. Due to the risk involved in Forex trading, it is recommended that someone new to Forex trading use a demo account for the first couple of months to get a feel for the software's win-loss ratio. When trading on a live account, ideally the Forex software will match or outperform the back-test results.
3) Automated Risk Scaling
When evaluating automated Forex system trading software, possibly the most important factor to look for is automated risk scaling. Profitable Forex trading software should have built-in risk filters and indicators to help prevent the software from trading in risky conditions. During unstable market periods, this will help minimize the number of automated trades made by the Forex software and reduce losing trades.
If you want to be successful and make money in automated Forex system trading, here are the top 3 things you should look for when evaluating this type of software:
1) How Does The Software Perform On Historical Back-tests?
Automated Forex trading software integrates with trading platforms like MetaTrader 4. Historical testing can be performed to simulate the trades and decisions the Forex software would have made against historical foreign currency exchange data. This can be a reliable indicator as to how the software might make trades in a live account.
An important statistic to look for in your back-test results is the win to loss ratio. The win to loss ratio will tell you how many times a winning (profitable) trade is made in proportion to how many times a losing trade is made. For example, if the automated Forex system made twenty trades, and 15 of those trades were winners, and five were losers, your win to loss ratio would be 15 to 5. This is also known as your hit rate; the software made 75% winning trades.
2) What Is The Performance Of The Software On Forward Tests?
Forward test performance is even more important than back-test performance. In current market conditions, does the software perform well and make profitable trades? If the Forex software does not perform well under live trading conditions, back-test results are generally meaningless.
Made available by most Forex trading brokers are demo accounts, where you make live trades but don't risk real money. Due to the risk involved in Forex trading, it is recommended that someone new to Forex trading use a demo account for the first couple of months to get a feel for the software's win-loss ratio. When trading on a live account, ideally the Forex software will match or outperform the back-test results.
3) Automated Risk Scaling
When evaluating automated Forex system trading software, possibly the most important factor to look for is automated risk scaling. Profitable Forex trading software should have built-in risk filters and indicators to help prevent the software from trading in risky conditions. During unstable market periods, this will help minimize the number of automated trades made by the Forex software and reduce losing trades.
About the Author:
John Hansen has several years of foreign currency trading experience and banks on the best forex trading software to make winning trades. Click here now to reveal the secret to profitable forex trading software online!
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