AI Forex Trading (Artificial Intelligence Forex Trading) has risen in popularity considerably over the last few years. Progress in artificial intelligence technologies have been significant and have carried into financial markets.

AI Forex Trading removes the risk of human error from trading systems, and enables trading to be completely automated. AI forex trading software is able to trade in the forex markets from market open to market close, unlike humans, who are susceptible to making errors and require breaks to eat and sleep. These trading systems are also able to factor an immense amount of information nearly instantaneously, making AI forex trading software far more efficient and effective than a human trader.

What Is AI? Artificial Intelligence In Forex Trading

Artificial Intelligence is when a robot is programmed to think independently. This means that a robot can adjust its own software in response to different outcomes. This allows the robot to learn and improve itself. So what does this mean for AI forex trading? AI forex trading or AI forex trading software refers to when a trading algorithm, designed specifically to trade currencies, is able to continually improve its performance based on changing market conditions and previous trade outcomes. This allows the AI forex trading software to automatically review its own performance, and make better trading decisions in the future. Typically artificial intelligence forex trading systems are very expensive, time consuming, and difficult to develop, as programming artificial intelligence requires a high level understanding of programming.

Common Misconceptions With AI Forex Trading

The most common misconception of AI Forex Trading is that any forex trading robot is AI. Many Expert Advisors are marketed as AI Forex Trading systems, however are typically quite basic robots that do not contain artificial intelligence. AI forex trading software is rare to find on the retail forex market, however this doesn’t stop companies using buzz words or marketing tactics to make their trading robots sell better.

What Is An Expert Advisor?

An expert advisor (EA) is a program developed specifically for MetaTrader trading platforms. An expert advisor is typically developed to automatically trade forex, however expert advisors may also be developed for other purposes (such as TradeProofer’s EA, which monitors slippage on forex trades). With expert advisors, traders can define the parameters to open a forex trade and set the parameters of closing a forex trade. A trader could use an expert advisor to make alerts when certain criteria are met, or they can 100% automate a trading strategy.

One advantage of an expert advisor or an AI Forex trading software is that both can be back tested across years of market history with a click of a button. This can give the system developer a realistic expectation of the forex trading software’s performance. This will indicate winning streaks, losing streaks, strike rate, profitability and drawdown statistics. 

Regular expert advisors are extremely common in forex marketplaces, unlike AI forex trading software. Unfortunately, it can be hard to distinguish whether an EA contains artificial intelligence sometimes due to misleading advertising. 

Advantages Of Using A Forex Trading Robot

There are a number of advantages to using a forex trading robot rather than manual forex trading systems.

 

1. Removes human error from trading.
   

   How many times have you taken a forex trade out of boredom, even though it doesn’t fit your criteria for a trade? Or perhaps you’re slow to close trades when they move against you in hopes the market comes back in your favour. Automated forex trading software removes emotions from your trading. Not only does it eliminate the risk of emotional impacts, but it also removes the risk of making a technical error such as inputting the wrong figure as a stop loss without realising. Removing human risk from a forex trading system is a considerable advantage of forex trading robots.

    

2. Efficiency.
   

   AI forex trading software and expert advisors are completely efficient. Unlike humans, forex trading robots don’t need breaks to sleep, eat, or use the toilet, meaning that they can continuously monitor the forex market. Automated forex trading systems are also able to make calculations faster than humans, execute trades faster than humans & exit positions faster than humans. Trading robots can take into account economic data, technical factors, price of a range of assets, other open positions and also account equity.

    

3. Performance Analysis & Backtesting
   

   A significant advantage of an expert advisor or forex trading robot is the ability to easily back test & record important performance metrics. Developing expectations of the performance for a forex trading strategy is important prior to letting the strategy loose. Back testing a trading robot is extremely efficient. Forex robots allow you to test the system across historical market data at the click of a button. This lets you find strengths and weaknesses across different markets. Perhaps you find your expert advisor is very profitable on GBP pairs however it isn’t profitable on AUD pairs. These steps of testing a forex strategy are incredibly easy with a forex robot. Getting performance metrics forward testing is also important. Try adding your forex trading robot to a demo account first. This lets you test the system without wasting time trading yourself, or wasting real money.

    

4. Accessibility
   

   Forex trading robots are very accessible. There seem to be thousands of trading robots available on forex marketplaces such as MQL5, which offer both free expert advisors and paid expert advisors. Downloading and installing an expert advisor is quite a simple process, and can be done for free. That said, just because a trading robot exists does not mean that it will generate profit. 

Risks Associated with AI Forex Trading & Forex trading Robots

Scams / False or Misleading Advertising For Trading Robots

Some companies sell the dream of a highly profitable & complex trading algorithm that is able to outperform the best traders, but deliver a product that is consistent at losing your money. It is important to backtest any forex trading robot. Test it on a demo account before risking your hard earned capital purely based upon marketing.

 

Technical Issues

A forex trading robot is completely reliant on the hosting system, trading platform, and internet connection. An issue with wifi or your computer can cause your trading robot to malfunction and potentially lose money. Typically people using forex trading robots will hire a Virtual Private Server (VPS). This lets their trading robot be active around the clock, with a greatly reduced risk of technical issues.

No Human Monitoring

Removing human interference from a trading system is typically a positive influence. That said, there is the risk that the removal of human thought patterns allow the trading robot to perform negatively unattended. It is very important to keep tabs on the performance of your trading robot on a regular basis. Try to check in on your forex trading robot performance at least once per week. The frequency that your forex robot should be checked at depends on the frequency of trades. 

HOW TO AVOID SCAM AI FOREX TRADING SOFTWARE / SCAM FOREX ROBOTS

Performing your own due diligence is critical prior to purchasing an automated trading system. Here are some things to look for when performing your due diligence on a forex trading robot.

In financial markets there are no guarantees of returns. Past performance is not a reliable indicator of future performance, and even the best traders or algorithms can have extended periods of losing trades and money. Steer clear of any company that boasts guaranteed profits for one of their trading robots. 

Another important factor to look when selecting a forex trading robot is verified trading performance. Many companies boast about the profits that their system will make, however without a verified track record this is meaningless. The track record should be updated live in real time through a third party software such as MyFXBook, & should be transparent in its performance over an extended period of time. Don’t be too worried if the performance shows periods of drawdown or losing, this is regular in any trading system. On the contrary, you should be concerned if the track record shows growth without any losses. This is possible in the short term, but unlikely in the long term.

Another check that may help avoid a scam is the demo account check. Will the seller of the trading robot let you test the forex bot on a demo account prior to purchasing it? Not all sellers that don’t let you do this are a scam, however if they allow you to try with a demo account then they are more likely to be reputable than those that don’t. 

Advice For How To Choose An AI Forex Trading Software / Forex Trading Robots

Look for products with a verified record on a live forex trading account. The results of backtesting or demo account testing may differ to a live environment. Commissions, swaps, changing spreads and slippage will all affect the live performance of any trading robot. The more data on performance that the seller has available for the trading system the better. Whilst reading reviews are nice and give some confidence, there is nothing better than real proof of performance. 

Consider the drawdown of the system. Whilst a lower drawdown typically means lower profits it also means that the system is more likely to have longevity in the forex markets. Higher drawdown can result in higher profits, but it also means that a system can make significant losses in a short amount of time. 

Consider the hosting systems needed. Will you operate the expert advisor on your local PC or will you rent a VPS to host the system? How will the cost of the VPS system & access fees impact your forex trading robot’s profitability? These are all important questions to ask before going live with a forex trading robot.