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Dispelling the TOP 3 myths of algorithmic trading
Dispelling the TOP 3 myths of algorithmic trading

Trading is an unusual occupation that leaves most people asking a lot of questions. Some believe that it is simply impossible to make an honest buck in the field. Those who have learned that Forex trading can bring real results still maintain a cautious attitude towards algorithmic trading, which involves the use of trading robots. And this is despite the fact that thousands of both experienced and novice traders have already made fortunes through calibrated automated trading algorithms.

We have identified the TOP 3 of the most common myths associated with algorithmic trading and are willing to expose them.

The robot will start to lose money at some point

In part, there are very solid grounds for this delusion. Many of those who trusted the scammers suffered a similar fate and similar situations are repeated to this day. Most often, robots that can lose the entire deposit are given to traders for free. It is important to understand that no self-respecting developer will share his robot without charging a fee for it on a regular basis. They can only provide a free trial period so that you can evaluate the benefits, but that is it.

But even if you pay money for using their robot, this does not guarantee its efficiency. Therefore, it is very important not to trust the very first robot you come across, but to check its history, find out the profitability over the last few months, analyze its behavior for different trading periods, in particular, at low and high volatility levels. By definition, those traders who do not bother with this kind of analysis cannot succeed.

In most cases, losses on Forex are caused by mistakes in strategy development and algorithm setup, while it does not matter whether those are executed manually or automatically. If there are errors, you will end up losing money in any case.

A trading robot will never be as successful as a human

Many believe this since they think that a robot is simply not able to feel the market. This statement is rather vague because it is primarily determined by the trading style of the trader. In particular, scalper and arbitrage traders simply cannot do without algorithmic trading, since only a robot allows them to trade as fast as possible.

When it comes to medium- and long-term investment, it makes sense to take into account the news and use technical analysis data to adjust your actions. However, no robot can guarantee the profitability of every trade. The main objective of algorithmic trading is to reduce the time spent on it and make sure that the profit covers up the loss through the use of a proven strategy.

With this in mind, you cannot but agree that in some situations manual trading will make it possible to turn certain trades into profitable ones. Therefore, the trader must first decide what goal he sets for himself: to earn quickly and consistently, or to settle for successful, but rare trades that require constant attention and analysis.

No one will ever sell a profitable robot

More often than not, such a thought did cross the minds of young and inexperienced traders who are just getting to know and understand the financial market. In fact, this myth can be easily dispelled just by doing some simple calculations. Therefore, even with a unique high-quality robot, the developer is unlikely to be able to quickly earn a multi-million fortune. However, if he starts selling it, he can reach thousands of people. And the better the robot works, the more people will use it, generating a profit for the developer.

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