Forex Auto Trading Systems

One of the interesting things about forex trading is how much you learn about human psychology. In the last few months since I started paper trading forex with Metatrader, first by myself then with an expert advisor, I have learned a lot about the way I think and react to my successes and failures in the financial markets.

“Pulling the trigger” is a phrase that traders use in regards to taking the action of placing a trade. Now when it comes to using an expert advisor or “forex robot” as they are called colloquially, the action of placing a trade is taken by the computer program. However, a far more consequential decision is the decision to purchase the live version of an EA and actually start live trading.

I myself have not yet taken that decision, and for a number of reasons I am glad I have waited to perfect my strategy before rushing out and letting a robot loose on my live account. The main reason is that, before I started I had no idea just how easy it was to make a rash decision like cranking up the lot size on my account without thinking about the consequences. On the other hand, waiting too long to get into the market can also be counterproductive. Time is money, and no more so than when you are forex trading. Compounding your trading profits takes months, and the sooner you start the sooner you can reap the benefits of your forex robot.

So I will wait until the graph below shows consistent upward progress for a few more months, and then commence live trading. There are 24 members who have taken up a free membership with Forex Goldmine since I joined their affiliate program and placed links on this blog, some of whom are  presumably testing the free demo version of Robominer, so I hope if any of you are reading this post, that you would feel free to contact me or comment on this blog as I would be keen to know how your trading is going and when you go live, to share in your progress.

I know it could be a challenge for some to have a computer set up online 24/5 for trading. I myself never throw away an old PC while it is still working, so I just use an old one with a RAM upgrade which surprisingly works quite well with the Windows 7 Pre-release beta version installed on it, and it just sits in my garage trading forex for me while I am at work or asleep. With a wifi modem it’s pretty easy to have it online without affecting other computers in the house, and I’m sure one of these days it will pay its way! It may even pay for a full version of Windows 7 for itself before the beta version expires!

So, whoever pulls the trigger first, please post on this blog and we’ll see who hits the target. Perhaps not $20 million but even a real profit of $2000 or even $200 on a smaller account, should be achievable before the end of the year. Watch this space.

If there is one thing I have learned in the last 4 months while paper trading the Forex Goldmine EA, it is that the more I try to hurry it along by investing larger amounts, the more counterproductive that is to my long term profit targets. That’s what I mean by “less is more” – the less you invest in each trade the more you make in the long run.

Since reducing the lot size to 0.2 lots per $10,000 on the 3rd of September, there has been an increase of  over $1000 in my account even if I don’t include the larger trades that I opened before the wipeout on the 2nd. That is an increase of more than 10% in less than a month. I now have a minimal drawdown of about $200, or just over 2% of the account, so can look forward to a similar growth pattern over the next few months.

So what is the moral of the story? Just build your account trade by trade and be patient. I estimate that even if I had left my Robominer trading at the minimum lot size of 0.01 I would probably have more in my trading account now than I have as the result of boosting it up to 1.o when I did. Even 0.5 was too high.

Let’s face it, if I had put $8000 in a bank term deposit a month ago I would now have less than $50 interest. So why would I complain about “only” having gained $1000? Putting these figures in perspective helps me be patient with my trading.  And of course having a paper trading account to play with makes the whole testing process a lot less painful than if I had risked real money. And that brings me back to the major advantage Forex Goldmine has over its competitors: the free demo version of Robominer which they are confident enough to let people download for testing purposes. ‘Nuff said.

There is no doubt that forex trading is a risky venture whether you trade by your own skills or use a Forex Robot. But there are ways to manage that risk, and the key method is by minimizing the amount being risked on any individual trade.

I have only been trading for a few months and the reality of just how quickly the market can move against a forex trader creating huge losses, was brought home to me again on Wednesday September 2 2009. On that day, both currency pairs traded by Robominer moved in a contrary direction within the same timeframe, creating the conditions for a massive drawdown on my trading account. The broker then started closing my positions one by one until my account had been reduced from $14,414.38 to $7,634.18. Almost $7000 was wiped off my account in one day.

And the frustrating thing is that this is only the second time within a month that this has happened. When a similar move happened on 31 July, I reduced the lot size I was trading from 1.0 to 0.5 to try and avert another disaster. I did however try to keep the account growing by increasing the lot size in proportion to the account balance.

I have now reduced that ratio to 0.2 lots per $10,000. The main reason I am trying to avoid reducing the lot size too drastically while I am paper trading is that I want to establish a reasonable middle-risk strategy – not overly aggressive, but not too conservative either. When I eventually start live trading this robot it will probably be on a $1k account, and that means that if for example I can establish that 0.2 is a good lot size to trade for $10k, I can start with 0.02 lots with the $1k account, or even start with $500 and trade the minimum 0.01 lots.

In this way I can establish whether this robot is going to be viable for the average everyday investor who may find it tough to find $10k or even $5k starting capital in the current economic environment. Plus, it is not wise to risk money you can’t afford to lose.  Nobody wants to take out a loan for thousands of dollars to trade forex, only to lose it and get stuck with the bill, and working harder than ever when their forex trading was supposed to make life easier by bringing in some easy money.

Add to that the cost of the robot itself (Forex Goldmine’s Robominer is a proven consistent trader but itself costs just under $500 for a lifetime licence) and you can see that the starting costs can add up.

However, I am still convinced that given the potential gains possible utilizing the huge leverage available within a forex account,  it IS possible to use a good forex EA like Robominer to make some serious money online. When I first installed Robominer in May it ran for 3 months without a loss, trading 0.02 lots on a $10k account, and increasing the account balance to about $13k. Only when I increased the lot size to 1.0, did it make its first losses.

So watch this space. I will see how Robominer fares over the next month or so, then decide on a good strategy for live trading.