The jury is still out on whether automatic Forex trading software, or Forex robots as they are commonly known, actually does work. Obviously, the dozens of scam artists and slick marketers out there do not help at all. With the roar of the crowd against automatic Forex trading software growing deafening, is it time to concede that Forex robots simply do not work?
The one thing that Forex traders (and any human being for that matter) hate to admit is when they've made a mistake. Automatic Forex trading software is just as vulnerable to operator error as any other software, so before we write Forex robots off completely, let us analyze some of the common mistakes that kill the profitability of any automated Forex trading software.
Not Enough Starting Capital
Beginner Forex traders can easily forget that the same rules of money apply to Forex as any other form of investment. They deposit a few thousand dollars into their Forex trading account, and expect to double or triple it in a matter of days. Whether you're using automated forex trading software or not, common sense should tell you that there's no way that you can turn $ 1,000 into $ 1,000,000 in a matter of months or even years. It sounds ridiculous to me even while I'm writing this, and yet thousands of people buy into the fantasy that it's possible every single day.
If you really want to make a lasting income from Forex, then you need to have realistic profit expectations and not a "get rick quick" mentality. That means that if you're only starting with $ 1,000, then do not expect to make more than $ 100 in profits every month. If you want to increase your forex passive income, then you'll have to build up your capital through additional capital investment and leasing your profits in to compound.
Bad Money Management Practice
Another mistake beginner Forex traders make that kill the profitability of their automatic Forex trading software is to risk too much money on each trade. Instead of limiting their risk per trade to 2-4% of their trading capital, they risk 10% -20% at a time, thinking that this will help them to realize their income goals faster. While it may seem harmless and even smart to do this, risking too much trade is actually harmful to your account in the long run. This is due the more money you lose, the harder it is to make it back.
For example, if you lose 10% of your account, you'll only need 11% to make it back. If you lose 20% of your account, you'll need to make 25% to get back to break even, and if you lose 50% of your account, you'll need a massive 100% get to back in the black! So if you're swinging 10-20% of your risk on each trade, the chances of you being down 20-50% at any given time is extremely high, which will make it impossible for you to recover, no matter how good your Automatic Forex trading software is.
When you're considering buying any automated Forex trading software, you need to do your research and be very selective, just as when you're making any purchasing decision. Once you've made your choice, make sure that you allow your automated Forex trading software to achieve its full potential by having adequate capital, realistic profit expectations and applying solid money management practice.