How do you find the best Forex robot?
Over the past dozen years, Forex trading has undergone considerable changes. The work principles changed, phone calls have been replaced by computers, a lot of support and algorithmic methods have been developed. The classic Jesse Livermore-like trader with a notebook and a pen was replaced with HFT traders in front of dozens of large monitors.
Today, in the world of automated systems, more and more robots and algorithms are created that simplify the trader’s work, or even replace the trader himself. Keep in mind, though, the fact that any robot must be created by a person who understands the specifics of FIX API Forex and works with their own algorithm. If a methodology is working, it will remain profitable in an automatic mode as well.
Today we will discuss, how to choose an algorithmic trading methodology, simply put, a trading robot.
Choosing a trading robot is no different from, say, selecting a new smartphone. You make a choice after you evaluate the characteristics, technical capabilities, additional functions, embedded software, and so on. Likewise, when choosing a robot, you need to assess its strengths and weaknesses.
- Choosing the type of the trading robot: there are
- Volume-based trading robots;
- Grid robots;
- Scalping robots,
- Robots that leverage classical or authorial trading systems;
- Leveled robots;
- Arbitration robots.
Let me draw your attention to the latter type. This type of robots can be divided into two groups based on the principle of conducting the deals: FIX API Latency Arbitrage and 2-Leg Arbitrage. The main principle of the first one is to search for and trade at a FIX API broker, which receives quotations with a slight latency. The second principle is based on trading simultaneously at two brokerage firms with basically the same condition: the difference between quotations of the same currency pair is being fixed. These techniques are very simple, easy to understand, and can serve as a basis for an excellent first robot in the trader’s collection.
As for the other remaining types, the more complex the trading system is, the more sophisticated is the robot based on it. Still, one of the main criteria in selecting the robot that it has to be easy to use.
- Studying the key parameters of the robot.
The next step is to find out in more detail, how exactly does the robot trade. Which currency pairs does it use? At which time frame does it conduct the analysis? Is it possible to adjust risk and capital management parameters? Is there a possibility of FIX API arbitration trading? Can the robot work in expert mode (signal without position opening)?
As a rule, this entire functionality is accessible in the robot’s settings, where you can enable or disable certain features and configure it under your requirements.
- Assessing the robot’s financial performance
- The average yield;
- Profit factor;
- Recovery factor;
- Trading period;
- Profitable deals percentage;
- Mathematical expectation;
- The average size of a profitable and unprofitable position;
- The Sharpe Ratio.
These parameters help you estimate, how profitable will the robot be. You must first look at the ratio of profitability to drawdown. If the year’s profitability amounted to 100% but the drawdown was at 75%, it is clear that the robot lacks risk management features. The ideal scenario is when the annual drawdown is no more than 20%. Yet again, arbitration robots (FIX API LatencyArbitrage and 2-Leg Arbitrage) have the lowest drawdown due to their speed and ability to hold exchange rate difference . You should also pay attention to the average transaction outcome. If the mean losing position is more than the mean profitable one, it signifies that the system won’t lead to profits, but only to losses.
- Looking through reviews
Maybe the simplest available method, as no one can give better advice on a robot, than someone who already uses it. With the help of all the information gathered on the previous selection stages, the reviews will help to come to a final decision on which robot to choose.
When you evaluate all the pros and cons according with these selection principles, you can choose the perfect robot to work on FIX API Forex. With these options, you will select the best product that in the long term can become a passive income source.