Using a Trading Plan With Forex Robot Software
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Frank Bot
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Published on April 16th, 2010
Trading forex with forex robot software can be a powerful way to generate profits on autopilot, but only if you set it up properly at the start If you get the configurations wrong, it can just as easily generate losses for you
Trading forex with forex robot software can be a powerful way to generate profits on autopilot, but only if you set it up properly at the start. If you get the configurations wrong, it can just as easily generate losses for you. Forex robot software can also be called an expert advisor, or automated forex trading system
The forex robot software will undoubtedly come with default settings. These may perform well however you will want to check them by trading with a demo account at first. Additionally , you will want to create your personal trading plan. This is fairly simple but it must be constructed distinctly for you.
Here is what you should include in your Trading Plan:
1. Position
Your position is the number of lots that you will take on a particular trade. The forex robot software default settings will probably assume that you want one lot per trade, but occasionally you will find forex software that has a sliding scale of preferred trades based on the strength of the trade signals or depending on which system is being employed, if the forex trading robot operates more than one technique. In this case you need to take the largest number of lots and use that as your basis for calculating risk.
Risk will probably vary based on risk appetite. In forex trading I usually recommend a risk level of 2-4%. This means that no more than 2-4% of capital will be risked on any single trade. So if a forex trader has a $5000 account, and wanted to work with a more conservative 2% risk management level, then he couldn't risk more than 2% of his $5000 per trade. That would be $100 he could risk per trade.
2. Stop loss level
The setting for the stop loss could be the key component determining risk. Theoretically the stop will activate and close your trade every time the price goes against you to a preset amount. On occasion, due to slippage, you may not get that exact price so always remember that you could sometimes lose a bit more than the amount of the stop loss.
Ordinarily it is best to make use of the proposed stop loss level preprogrammed in your forex robot software. If you ever alter this, you might find you may not get the envisioned results because either the stop is activated too early and too often or losses are greater than they should be. So if the stop loss is placed at a level that will involve you in a risk more than 2% to 4% per trade, decrease the position size, which might mean shifting to a mini account from standard or to a micro account from mini.
3. Profit level
The forex trading robot will also automatically exit the market at a established level on a successful trade. Again, the automated forex trading software will come preloaded with a default setting which the programmers have usually tested and discovered to be the most successful. You are able to analyze this on your own if you want.
If the forex robot software covers a number of different currency pairs, you might find that the limit order has been set at the same point for all of them, i.e. they will all close at the same number of pips profit. In this instance it could be advantageous tp perform some back tests, because this suggests that the programmers have not optimized for all of the currency pairs that the FX expert advisor can handle.
The forex robot software will undoubtedly come with default settings. These may perform well however you will want to check them by trading with a demo account at first. Additionally , you will want to create your personal trading plan. This is fairly simple but it must be constructed distinctly for you.
Here is what you should include in your Trading Plan:
1. Position
Your position is the number of lots that you will take on a particular trade. The forex robot software default settings will probably assume that you want one lot per trade, but occasionally you will find forex software that has a sliding scale of preferred trades based on the strength of the trade signals or depending on which system is being employed, if the forex trading robot operates more than one technique. In this case you need to take the largest number of lots and use that as your basis for calculating risk.
Risk will probably vary based on risk appetite. In forex trading I usually recommend a risk level of 2-4%. This means that no more than 2-4% of capital will be risked on any single trade. So if a forex trader has a $5000 account, and wanted to work with a more conservative 2% risk management level, then he couldn't risk more than 2% of his $5000 per trade. That would be $100 he could risk per trade.
2. Stop loss level
The setting for the stop loss could be the key component determining risk. Theoretically the stop will activate and close your trade every time the price goes against you to a preset amount. On occasion, due to slippage, you may not get that exact price so always remember that you could sometimes lose a bit more than the amount of the stop loss.
Ordinarily it is best to make use of the proposed stop loss level preprogrammed in your forex robot software. If you ever alter this, you might find you may not get the envisioned results because either the stop is activated too early and too often or losses are greater than they should be. So if the stop loss is placed at a level that will involve you in a risk more than 2% to 4% per trade, decrease the position size, which might mean shifting to a mini account from standard or to a micro account from mini.
3. Profit level
The forex trading robot will also automatically exit the market at a established level on a successful trade. Again, the automated forex trading software will come preloaded with a default setting which the programmers have usually tested and discovered to be the most successful. You are able to analyze this on your own if you want.
If the forex robot software covers a number of different currency pairs, you might find that the limit order has been set at the same point for all of them, i.e. they will all close at the same number of pips profit. In this instance it could be advantageous tp perform some back tests, because this suggests that the programmers have not optimized for all of the currency pairs that the FX expert advisor can handle.