By Philip Nightingale
Since late 2007, there's been an explosion of "expert advisers" on forex trading software all promising to bring you untold riches at the touch of a button on your computer. But is it REALLY that simple? Do these things REALLY deliver as the sales copy suggests? Wouldn't it be great if they did?
Well, in my humble opinion, some can and do. And if you step up to the plate with the right mindset, have one of the better-performing pieces of kit, YOU TOO could be on your way to bringing in some easy money over the coming months.
And there lies the first point to note - over the coming months.
The Foreign Currency Exchange (Forex) is a world market where more than $3Trillion changes hands on a daily basis. The two drivers of this market in the main, are supply & demand and major news items and anyone trading in this arena can make or lose money on the tiny differences between any number of currency pairs; eg Euro/Dollar, Dollar/Swiss Franc, etc, etc.
Should you come to this market with a get-rich-quick mentality, it will eat you for breakfast - and more so if you have a lucky break early on. But if you adopt an investment mindset, taking account of your own attitudes to risk vs reward, then the outcome can be completely different - and to your benefit.
The trick is to keep a close eye on losses rather than the profitable trades. At the time of writing, nearly all expert adviser software has been programed in such a way to trade with a "negative" risk/reward; ie 1 loss will be greater in value to 1 single gain. That said, software with accuracy rates of 80% and over should keep an account balance up overall. And I would suggest periods of 3 to 4 months to be used to determine this fact (or not). Never, repeat NEVER be wowed by seeing figures that have been produced over a short space of time, for example "this software raked in $17,456 in just 7 short weeks". I think you get the picture?
So, why mention this? Well, all programed software of this nature usually has various parameters that can be set prior to trading and one of the main one's is your risk per trade. If you are currently reviewing a piece of software that doesn't have this parameter available for adjustment, you should steer well clear - again, in my humble opinion - as the developer's attitudes to risk/reward (set as default) could be a lot different to your own.
The other factor to consider here is how many "open" trades will the software allow at any one time? If it's only 1 and you are prepared to risk up to 5% of your trading "bank" on any open trade then it's simple. However, some expert advisers have been programed to have more than 1 trade open and where this is the case, you need to take a view on where your "risk per trade" should be set. And watch decimal places as well. eg 0.2 could mean 2% risk per trade or it could mean 20%!
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