Can you trust a robo-advisor in Forex?

Trading robots are no longer news to anyone. They appeared in trading a long time ago, and during their existence they acquired a double reputation.

On the one hand, experts note an increase in demand for robot assistants.

Thus, according to experts, the size of investments that will be managed by special programs in the coming years will increase more than 10 times, and will reach $8.3 trillion.

At the same time, distrust of robot advisors is growing, and for good reason.

There are already precedents when, due to the fault of programs, companies suffered multimillion-dollar losses; failures in their work even caused trading stops on stock exchanges.

So, let's figure out how such automatic systems work and whether they can be trusted.

The robot is what it is

The question of who is more effective – a person or a program – remains relevant to this day.

There is still no clear answer, as much depends on the situation and the goals that the trader sets for himself.

Correctly recognizing the situation and deciding which path to take is, in this case, the most important thing. Here's what to consider.

So, trading robots can be divided into two types: those that trade independently, and those that only advise on how to trade.

In the first group, the robot analyzes the received data and, based on it, makes a decision to buy or sell the asset. Another type of program analyzes the data and alerts the trader to situations where they could open a trade.

Continuing our investigation, we will address the myths associated with the benefits of robotic trading.

Myth #1 : Thanks to trading advisors, traders are immune to emotional pressure and stress. Therefore, human error is eliminated.

This statement is incorrect. Even if trading is fully automated, the trader still monitors its performance. If the robot trades at a loss, the trader will also be concerned and stressed, which could lead to interference with the program.

As a result, we make the same mistakes that a trader would make if he traded without the program's support.

Myth No. 2: A robot can calculate probable profit.

Again, this is incorrect. There is no robot that will make money in every market. All assistant programs are highly specialized. Some trade in flat markets, others in trends, and still others are designed for scalping. While they make money in one market, they lose in another.

So even a profitable robot can suddenly start draining your deposit. As the saying goes, "past income is no guarantee of future income.".

 So what are the advantages of a trading robot?

 First, it's speed. When the program analyzes and opens a trade, it makes a decision within milliseconds.

This means the advisor will be able to execute trades at the best prices. If the broker also has a high order execution speed, like AMarkets , where orders are executed in 0.03 seconds, the advisor's advantage becomes undeniable, especially when scalping.

Let's move on. Using an advisor, it's easy to predict a drawdown or loss on your account. After all, every robot has its own "Achilles heel," and knowing when this will happen, or noticing its first signs in the market, you can put the robot on hold until a new favorable moment arrives.

The United States has the highest level of trust in robo-advisors, where they have been entrusted with over $44 billion in assets. China is next, with advisors managing $27 billion.

Third place goes to the UK, where the robo-advisor Nutmeg manages $750 million. Russia rounds out the list, with no more than $15 million under management.

If you decide to trust a robot, check its key parameters: are the advisor's results publicly available, what are the maximum losses within the strategy, and what kind of return can be expected.

If this information is not disclosed by the robot's creator or is not supported by statistics, then consider whether it is worth investing in a "dark horse.".

So, what do we have? A trading robot is better suited than a trader to preserving and growing a deposit. However, there are no completely independent advisors, and each individual robot requires, at a minimum, passive monitoring.

You need to trust your advisor, and knowing his strengths and weaknesses, intervene only in extreme cases.