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Forex trading robots sound great, don't they? There's currently a lot of hype surrounding them that makes them appear to be the perfect way to earn an income on autopilot. When you look a little deeper, the truth is very different. Before you get burned, it is wise to consider something about these "robots". In this article we'll look specifically at what a forex robot is and the issue with them that most people ignore when caught up in all the hype.

Is it really a robot?

A forex robot is not an actual robot. It is a computer program with some predefined algorithms. Those algorithms tell the software how to trade currency markets. For example, the algorithms might contain information such as daily trading limits and risk settings. Often these settings can be changed to suit an individual investor (high risk investor versus a conservative one).

Backtests are not a good indicator of future performance

Most forex robots out there only use backtests as evidence of a trading history.

If you are looking at a forex robot that has only got performance results through backtests then you should be very careful. Backtesting is a process of gathering past market data, then using computers to check the performance of algorithms across that data. Often, an algorithm is discovered that performs very well across the data. However, because market conditions are not constant, there is no guarantee that the algorithm will perform well in the future. Some forex trading robots are being sold with only one algorithm that has only been exercised using backtesting!

There are good forex trading robots available, however my strong advice is to investigate the performance results before you commit to buying one.

IvyBot at http://www.IvyBot.org right now.