Forex Trading Bot: Quick Guide

Forex trading involves trading positions on currency pairs, the values of which are compared relative to one another. Because Forex trading is a little more abstract and requires more research, many people believe Forex trading is reserved only for professional stock market traders.

That’s certainly not true! Anyone can learn to trade Forex and make money on this unique market. If you don’t know where to start, you’ve come to the right place. This ultimate guide will break down everything you need to know about trading Forex, including which platforms to use, what strategies to follow, and more.

What is a Forex Robot?

Forex robot is a trading software that monitors the market for trading opportunities, and executes them automatically on your behalf. Most trading bots use AI algorithms to decide on entering and closing a position taking custom parameters you set into account. In some sense, a forex robot is an advanced and more embracing form of trading signals executed automatically, meaning you don’t have to analyze technical data and fundamentals of an asset you’re willing to trade. 

How Forex Robots Work?

Each of the automated forex trading robots have a specific strategy, which has been designed and hard-tested by the developing team. Most strategies rely on “if/then” logic, meaning when a condition or a set of conditions are met, the bot launches the built-in logic pattern such as enter or close the position.

Here is a quick example of how if/else logic works with FX trading:

• IF Condition: Imagine your robot targetS the EUR/USD pair and activates if the RSI for EUR/USD dips below 30 or goes above 70. 
• Then Condition: If your robot notices RSI drop below 30 or goes above 70, it will instantly place a buy order for RSI < 30 and sell order for RSI > 70.

The example above is rather simplified for educational purposes. In fact, some bots use much more complicated if/then sequences to maximize returns and reduce risks associated with entry/exit. As a rule, complicated systems yield more rewards but also carry more risks compared to more straightforward strategies.

Bots work along with trading platforms that connect you to a Forex broker, which in turn, displays the real-time data related to the market. The data feed includes several parameters like open/close price, time intervals and variative feed on top.

Top-notch robots use market data analysis along with market risk forecasts to make the best trading decisions going forward. Bots can also spot major market trends, monitor local price fluctuations, track patterns, and more. A trading robot might either focus on one technical pattern, or it could analyze several patterns via indicators like moving average convergence divergence (MACD) and relative strength index (RSI) oscillator to get the highest yields.

You can usually access any bot through the provider’s website and either download or use it directly via a browser. Summing up, a forex robot is a popular tool for any trader — from newbies lacking technical knowledge to seasoned veterans in need of 24/7 automated trading.

What are the Pros and Cons of Using a Forex Robot?

In addition, forex robots do not sleep (obviously), meaning that they are in operation 24/7, ensuring that potentially lucrative opportunities are not missed. This is one of the major selling points and benefits of using these forex tools.

The main benefits of using a trading robot are that it eliminates emotions from the trading process and is a passive trading strategy. This means you don’t have to analyze technical indicators and fundamental data, or even understand how and why the crypto market functions. Different trading robots allow different levels of user involvement but they all work on pretty much the same logic. 

Pros of Using Forex Trading Bots

Even though bots have some potential loopholes, they limit emotional trading and maximize your potential to spot as many profitable deals as possible. Let’s boil down key pros of using bots.

• Can combine several strategies simultaneously 
• Fits both newbies and experienced forex traders
• No risk of loss due to emotions like fear or rage trading
• No downtime if connection is stable as bots operate 24/7 
• Users can adjust software from manual to fully automated trading
• Automated scanning allows monetizing more tradable currency pairs
• Track charts, analyze patterns and take historical background into account to make efficient decisions.

Cons of Using Forex Robots to Trade

The biggest disadvantage of automated trading bots is that they can’t be 100% accurate over the long run. The inclusive list of cons is highlighted below:

• Requires stable internet connection
• Some developers do not update the software
• Disregards crowd psychology and emotions entirely
• Potential of being scammed if software is a mere bite
• Can’t predict volatility, hence less efficient if market is storming
• Paternal strategies as most robots leverage intraday pattern for scalping
• The market trends change fast, which may negatively affect some strategies 

How To Choose The Best Forex Trading Robot

Trying to choose the best trading robot? Keep the following tips in mind to maximize your chances of picking a suitable piece of trading software.

Accuracy rating

First and foremost, you need to consider the robot’s accuracy rating. The number one reason why you would be looking to use a trading robot is to find the best trading opportunities and make positive returns in a passive approach to cryptocurrency trading. With that said, you should be looking for a trading robot with an accuracy rating of at least 88%. 

You could try writing to the vendor and ask for his track record audited over say 2 years and see if you get a reply but don't hold your breath.

Trading opportunities 

Another key metric to assess is the different trading opportunities the trading robot can identify. Usually, trading robots that scan a larger volume of cryptocurrencies and crypto crosses will find more unique trading opportunities. Certain AI algorithms also search for multiple technical patterns and trends to trade, which in turn increases your overall daily trading volumes. So, this is something to bear in mind especially if you are interested in executing high trading volumes per day. 

Strategy and Automation

Finally, you might also want to look into the strategy and level of automation that your forex robot employs. For example, some robots may go for higher risk strategies, whilst others are more risk-averse. Double-check which rules your robot abides by and ensure they tally with your investment goals.

Automation level is another thing to look out for. As mentioned, most robots are fully automated, which will mean they require access to your trading capital. However, some providers (such as Learn2Trade) offer a very similar service to what a forex robot will supply – except you do not need to give access to your trading account. Many traders prefer this as it adds an element of safety to the proceedings.

Truthful & Independent Reviews 

Another thing to keep an eye out for is reviews and testimonials. The best types of reviews are Trustpilot reviews, as these are verified as real people and are not made up by the robot’s provider. Alternatively, some robots will have a dedicated Facebook page where current and former users may comment and add validity to the robot’s strategy.

You may also want to search the internet for the best forex robot reviews from reputable online sources. Numerous websites review the best forex robots and cover all of their features in detail – so make sure to read a few different reviews to get a comprehensive overview.

Low Drawdown Rate Bot

Perhaps, you know that risk management is a crucial part of successful trading over the long haul, but what if your bot breaks some risk management rules? 

Imagine you have $100,000 and you lose $50,000, that’s a 50% loss of your portfolio traders would call a drawdown. In other words, a drawdown is the reduction of your portfolio’s size after a series of losing trades. It’s the difference between peak and bottom, normally calculated and displayed as a % of your trading account. 

Big losses rarely fit any strategy. Which is why you might want to pick a trading bot that has the lowest possible drawback rate to protect your riches. Normally, bots with lower drawback rates yield you lower returns. However, such bots are more reliable over the longer investment horizon — a little patience goes a long way.

Thoroughly Tested Bot

Developers use back-testing to understand whether the system is behaving appropriately and whether the Forex trading strategy is any good. 

In essence, back-testing is the process of testing a bot taking the historical data into account. It includes a simulation of each tick opening, closing at a certain price and reaching highs & lows. Once compared with back data, developers have a good sense of whether the strategy works well. 

Background check never hurts, especially when it comes to such important matters as trading your own money. Make sure to check some data behind a testing phase, what developers say about audits, how they highlight it, etc. You can digest more about technical back-testing here.

You can rely on reviews to make it simple, but only do so if you’re sure the reviews are not fabricated by aggregators or malicious actors paid for сonveying bulk of senseless feedback. Ideally, you should talk to a trader who already used the software and has something valuable to share. 

Demo Account Option

Before trading real, you might want to give your bot a try. Most trading platforms have a demo account option, which helps a lot once getting started. Make sure the platform provides a demo account feature. A bright example of a demo account provided would be 3Commas. 

Best Forex Trading Bots

3Commas — Overall Best Forex Trading Robot 2024

3Commas is an automated trading platform offering two types of easy-to-use bots. It’s the most straightforward way to start trading or bootstrap returns for traders of all kinds — from rookies to seasoned veterans alike. 

Platform offers two types of robots — Gordon is a Dollar Cost Average (DCA) bot that is the perfect way to get started with automated trading. It’s pretty intuitive and doesn’t require any additional skills or knowledge. Grid bots are more complex and used for out-of-trend occasions like sideways markets. 

Newbie traders can benefit from a free 3Commas plan. It provides access to all features except paper trading (demo account). Any user can set up the first DCA bot at no extra cost. To learn more about pricing and features, check out the plan page.

Minimum Deposit – No minimum deposit required, users can start with a free plan

Winrate – Depends on a strategy picked

The 1000pip Climber System is another Forex Expert Advisor that has stood the test of time. It has a range of real-live data verified by MyFXBook accounts showing the EA’s performance over a sustained period of time. 

One of the unique features that separates the 1000pip Climber System from the rest is 

a wide range of currency pairs available along impressive strategies implemented. These features ensure traders can adjust to varying market conditions. 

However, the system has some loopholes such as limited demo account features and lack of MT5 support. Also, reviews regarding the customer & live support are controversial.

Minimum Deposit – No minimum deposit required

Winrate – The developers highlight up to 20,000 pips during the three years

Forex Gump Bot

The Forex Gump bot is popular among traders due to its advanced algorithm which encompasses a wide array of market conditions for it to adapt quickly to ever-changing circumstances. The robot has a solid background in terms of performance, reliability, and customer reviews. Other perks include a 30-day money-back guarantee and demo account option available for a small pay. 

Even though the bot is time-tested and quite affordable, some EU customers might choose an alternative because it works best with high leverage around 100:1 or even more. Other drawbacks include MT4 only support and a limited currency pairs available for trading (AUD/USD, EUR/CHF, EUR/GBP, EUR/JPY, EUR/USD, GBP/USD, USD/CAD, USD/CHF, USD/JPY)

Minimum Deposit — $4,000 or equivalent if depositing in different currency for a regular account and $40 or equivalent if depositing in different currency for a micro account.

Winrate – up to 1,000% gains according to the website information

ForexVPS Bot

ForexVPS is a dedicated FX server for those who prefer fast-paced trading, this robot may be a good opportunity, with many currency pairs to trade MT4 & MT5. 

The bot has been tested with data from different dates, using different setups to limit potential spreads and minimize slippage. Simply put, its efficacy doesn’t depend on a specific broker, but you might want to keep your spreads as low as possible because the robot works on short timeframes. 

Minimum Deposit – $200 or equivalent if depositing in different currency

Winrate – Depends on a strategy picked

Forex Trendy Bot

Forex Trendy bot is an innovative Expert Advisor that trades a wide range of currency pairs, supports many platforms, charts, and patterns. 

The robot operates on a unique automated trading algorithm that has historically picked trades verified by MyFXBook. More than 300 charts are available for traders along with dynamic trading logic and slippage & spread protection. Chart pattern recognition is a part of the basic version, entailing no extra costs for a user. However, some traders claim the robot lacks high-end customer support despite reasonably high payments per quarter. 

Minimum Deposit — $250 or equivalent if depositing in different currency

Winrate – The developers promise up to 90% accuracy if trades are made as directed

The Forex Diamond Bot is one of the leading FX trading robots and has earned very strong reviews from users. It has high ratings on Trustpilot and users have been particularly impressed with the performance of the robot.

As well as the strong performance verified by MyFXBook, traders have been particularly impressed with real-time calculations, versatility, and up to 80% winrate. However, some users prefer having live support, as they might need directions on how to use bot at the beginning. 

Minimum Deposit – $1,000 or equivalent if depositing in different currency

Winrate – 75% to 80% profits, depending on currency pair and strategy picked

EA Builder Bot

EA Builder is beginner-friendly bot suitable for almost any trading preferences. The robot supports stocks, bonds, crypto, and FX currency pairs across multiple platforms like MetaTrader 4 & 5, TradesStation. Both free and paid versions are available — the difference is the paid version has advanced features designed to bootstrap trading results and yield as much as 200% depending on a strategy picked.

To accelerate the start for beginners, the platform has 15 video tutorials ranging 2 to 7 minutes in length. The topics include important aspects such as strategy creation, breakout strategies, daily breakout with pending orders, optimization, money management, automated entry, custom indicators, and more. 

Minimum Deposit – Depends on platform picked

Winrate – Depends on strategy used

What are the Risks Associated with Forex Trading Bot

Robots can’t think beyond the built-in set of rules they box. As a result, they only can perform a limited number of algorithms and it doesn’t matter how well these algorithms have been designed. Robots can use technical indicators to analyze and evaluate the market, but they lack abstract thinking and crowd psychology components. The mentioned factors cause a list of risks associated with using automated trading software.

Poorly Performing Algorithms

Simulated performance results may have certain limitations. Unlike an actual performance record, simulated results do not take several components like lack of liquidity into account. Poorly-designed bots work on hindsights rather than thoroughly calculated models. As a result, the real-life profits and losses might not correlate with predicted ones — some bots don't indicate profits correctly, resulting in a wasted risk management. Summing up, you can make money in FX, but an automated trading system that has never been actually traded is not the way to do it.

Another related issue is data-mining, which haunts many FX software buyers. In essence, developers deliberately pick only a few good results, leaving the rest off-board. More refined cheating is testing a bot just once, instead of running multiple cycles. As a result, there are many FX trading software examples misleading, showing exaggerated profits, and reduced losses. 

If you’re willing to get a forex trading system, you can find a bot with track records provided, but not a controversial, mediocre simulation. 

Flash Crashes

A flash crash refers to a rapid price decline due to a withdrawal of orders followed by a quick recovery. Automated trading has exacerbated many flash crashes during the last decades. Some prominent examples are the $1 trillion DJ flash crash back in 2010, NYSE plummet in 2015 or a staggering 6% drop for a GBP/USD pair in 2016. 

Imagine an asset trading at $100 — most bots aim for close sales of $95 to minimize losses and $105 to make some profits. As long as the price goes lower, more algorithms are triggered along the downside journey, pushing the price even lower due to massive selloffs. Subsequently, the whole thing reverses itself as buying bots consider the price cheap and outstrip sellers until it finds a balance.

You can set up a bot working well 99% of the time, but that 1% may negate your returns. That’s why you should implement several strategies to diversify risks as much as possible. 

The Long Run Ineffectiveness

Some bots claim working smoothly no matter what the market is, but quite a few actually do so. If your FX trading system helps traders win regardless of market conditions like 3Commas, it’s a good one. 

As a rule of thumb, a bot tends to be effective if it leverages several opposed strategies rather than similar patterns. Signal-based, counter trend, and scalping are perfect examples of most widely used strategies to diversify profits and minimize losses. 

How to Avoid a Scam Forex Bot

To avoid a scam scheme, you have to spot it first. Let’s have a look at four most common schemes related to FX bots. 

Withdrawal Fraud

A trader cannot withdraw funds from the account because the platform is a one-day fake. The scammer either doesn't respond or makes unclear claims, justifying why you can't withdraw right now. To avoid it, pick a licensed and trusted broker regulated by a financial authority.

Signal Seller Scam

Some platforms provide trading signals in special Telegram/Discord groups, but most just suck money out of trustful pockets. These are called signal seller scams initiated mainly by investment account companies, pooled asset managers, and retail traders. Such groups or individuals with attractive portfolios charge newbies to share financial advice. Signal sellers usually vanish after taking the trader's money. To avoid it, you should either avoid signals or check the renowned ratings of signal providers. 

Bid/Ask Spread Scam

Spread scam is the oldest one existing. In essence, scammers offer large bid/ask spreads on a specific currency pair. As a result of unreasonably high spreads and commissions set, most traders lose money on such trades. Even though financial authorities monitor unethical behavior, Forex is a somewhat gray market at the moment, and newbies fall into traps frequently. To avoid it, you can compare spreads across several platforms. 

Forex Pyramid Scheme/Forex MLM

The scheme is also known as a pyramid structure similar to multi-level marketing (MLM) but with intangible goods. In essence, the owner recruits new paying members, who in turn attract even more underling members. Higher members get paid upfront fees until the whole system fails to operate eventually, which is just a matter of time. To avoid it, check reviews and pay attention to any red flags, the first being upfront fees.

Depending on a score, you can evaluate the risk level and decide whether to proceed with a particular piece of software. 

• If the score is 30-50 points — you have a fairly high risk 
• If the score is 20-30 points — you have an average risk
• If the score is 0-20 points — you have a fairly low risk

The score doesn’t necessarily spot scammers, but might give you a good hint to judge for yourself. 

How to Use a Forex Trading Robot?

If you feel like starting trading using robots, we’ll guide you top to bottom and show how you can use the overall best Forex trading robot for 2024 by 3Commas.

Step 1: Create an Account

Reach out to the 3Commas website and click on Try It Free to get started. 

Fill out all the fields required to create an account from scratch. Alternatively, you can use your Apple/Facebook account to pace up and keep going faster.

Step 2: Set Your Account

If you’re willing to start off using 3Commas Bot functions directly, you have to connect your exchange account with an API. Read more about connecting an exchange using an API key. 

Otherwise, if you want to practice first, you can use a demo account also known as a paper trading account. Read more about enabling demo mode. Please note that paper trading is only available for subscribers. In other words, 3Commas free doesn’t provide a demo account by default. 

Step 3: Pick a Bot

Once you sign in, you’ll see the dashboard by default and the side menu left hand. Click on the trading bots tab to expand the list of available trading bots 3Commas provides.

For example, GRID bots work perfectly on fluctuating sideways markets, which is a fit for Forex trading. You can read more about AI GRID bots here.

Step 4: Set the Bot

Once you pick a bot type, proceed to its page and set trading criterias as limit prices, profits, and available amount. You can also set your bot manually by clicking on a Manual strategy tab instead of the default AI strategy menu appearing. 

Click on the Create button to finalize a bot creation. You can learn more about 3Commas bots here.

Closing Thoughts

In conclusion, the world of Forex trading has witnessed significant advancements in recent years, with the emergence of Forex trading bots being one of the most noteworthy developments. These automated trading systems have transformed the way traders approach the foreign exchange market, offering a range of benefits and opportunities. However, it's essential to understand that, like any tool, Forex trading bots come with their own set of advantages and disadvantages.

The Pros of Using Forex Trading Bots:

1. Emotion-Free Trading: One of the most significant advantages of using trading bots is their ability to eliminate emotions from the trading process. Emotions like fear and greed can cloud judgment and lead to irrational trading decisions. Bots execute trades based solely on pre-defined algorithms, reducing the impact of emotions.
2. 24/7 Operation: Forex markets operate 24 hours a day, five days a week. Trading bots can monitor the markets and execute trades around the clock, ensuring that potentially lucrative opportunities are not missed, even when traders are asleep.
3. Diverse Strategies: Forex trading bots can be programmed to implement a wide range of trading strategies, from trend-following to mean reversion, scalping, and more. This versatility allows traders to diversify their trading approaches and adapt to changing market conditions.
4. Technical Analysis: Bots can analyze vast amounts of technical data, such as price charts, indicators, and patterns, in real-time. This data-driven approach enables bots to identify trading opportunities and execute trades with precision.
5. Back-Testing: Many trading bots undergo rigorous back-testing using historical data to assess their performance and refine their strategies. This provides traders with a level of confidence in the bot's capabilities.

The Cons of Using Forex Trading Bots:

1. Lack of Emotional Intelligence: While the absence of emotions is an advantage, it can also be a drawback. Bots lack the ability to adapt to unforeseen events or market sentiment changes, which human traders might pick up on.
2. Not 100% Accurate: No trading bot can guarantee 100% accuracy. Market conditions can change rapidly, and unforeseen events can lead to losses. Traders must understand that bots are tools, not infallible profit machines.
3. Dependency on Stable Internet: Trading bots require a stable internet connection to function effectively. Any interruption in connectivity can result in missed opportunities or bot malfunctions.
4. Limited Predictive Abilities: Bots rely on historical data and technical indicators to make decisions. They cannot predict sudden market volatility or black swan events, which can lead to unexpected losses.
5. Risk of Scams: The forex trading bot market is not immune to scams. Some developers may offer fraudulent bots or exaggerated claims of profitability. Traders must exercise caution and conduct thorough research before selecting a bot.

Choosing the best Forex trading bot involves careful consideration of factors like accuracy, trading opportunities, strategy, and automation level. Additionally, traders should seek truthful and independent reviews to gauge a bot's reputation and performance.

Risk management is crucial when using trading bots, and traders should be prepared for the possibility of drawdowns. Selecting a bot with a low drawdown rate can help protect investment capital over the long term.

Thoroughly testing a bot's performance and understanding its strategy through back-testing and research is essential. Engaging with the trading community and seeking feedback from experienced traders can provide valuable insights.

In conclusion, Forex trading bots offer a compelling option for both novice and experienced traders. However, they are not a guaranteed path to riches and should be used as part of a well-rounded trading strategy. By carefully evaluating the pros and cons of using trading bots, conducting due diligence, and implementing robust risk management practices, traders can harness the potential benefits of automation while minimizing the associated risks. Remember that successful trading, whether manual or automated, requires continuous learning and adaptation to evolving market conditions.

Closing Thoughts

If you consider entering the Forex market, you should think about the way you want to do so, as the market is pretty established already, and over 80% of the volume traded are algorithms. 

One of the best ways to compete with a robot is another robot. However, you should carefully pick your trading software provider as most providers gloss over stats, sharing inflated numbers and returns. You might want to work with a reliable bot provider like 3Commas.