Changes in the financial market and falling bank deposit rates, triggered by the pandemic in recent years, have led to increased interest among ordinary citizens in stock trading and the stock market. In particular, Forex has become an entry point to this new sphere for many. Automated investor advisor, aka robo-advisor or robo-adviser is a special brokerage service designed primarily for beginners and inexperienced traders. Many big brokers and banks offering brokerage services have robo-advisers. Why Forex?
There are several reasons:
- The subject of Forex trading is international currencies, a familiar financial instrument.
- A simple trading mechanism: “buy cheaper – sell dearer”.
- The amount of profit is not limited either by market participants or by legislation.
However, this way of investment has one significant minus: high risk is a “true companion” of good income. Many beginners forget about it, hearing about friends’ or well-known personalities’ successes on the exchange market. They usually rely on luck, which literally turns trading into Russian roulette with all invested money at stake. At the same time it is possible to reduce the overall risk – a systematic approach helps.
The systematic approach is based on three components:
- Own experience – can be obtained as a result of training and practice on demo accounts and real trading.
- Forex strategies.
- Expert Advisors.
Let’s consider the last two points in detail.
A Forex strategy is a complex of tools and actions aimed at gaining profit. In other words, a strategy is a standardized sequence of actions on the exchange, adhering to which, it is possible to multiply the invested funds. In this case, any good strategy must take into account a number of basic factors:
- Trader’s schedule,
- account balance,
- choosing a currency pair,
- trading interval,
- Market entry and exit rules,
- list of indicators (if any),
- capital management techniques and other subtleties.
Experienced traders, who are engaged in trading, usually gradually develop their own strategy based on those tools, which are more convenient for them to work with. However, it can take months or years to achieve this result, so beginners often opt for ready-made strategies tested by thousands of traders.
There are a lot of strategies, and new ones are constantly appearing. Here are just a few of the most successful and relevant solutions:
- Woodies CCI – based on the eponymous indicator and is more suitable for adherents of independent analysis of the price chart.
- 3 moving averages – the oldest mechanical analysis tool, playing the role of a trend indicator.
- “Surfing” – also uses moving averages, but with another method of construction – by minimum and maximum price.
- Alligator + Fractals – a compilation of the two indicators, put in the name. The strategy consists in searching for a sideways movement (trend) and subsequent price breakthrough of the nearest “fractal”.
- “Sniper” – a very popular strategy in Russia, which uses market corridors identified during the Asian session.
- “Victory” – is actually another classic strategy – scalping – trading on charts with minimal time intervals and quick market entries/exits. It is famous for its minimal risks and clearly defined rules.
It should be understood that the above strategies we have given only as an example, and for their successful use also necessarily requires more detailed analysis and practice.
In general, all Forex strategies can be divided into 3 large groups:
- Simple – working on the analysis of charts, quotes or basic situations.
- Indicator ones – working with standard market chart indicators.
- Special – trading according to specific indicators or evaluation models.
Forex Expert Advisors
Any strategy requires a human presence, which means that the final result is necessarily affected by a psychological factor. Fear of making a mistake and losing money, excitement, fatigue, irritation of failure, anxiety, and other emotions and feelings often make it impossible to follow the strategy precisely, introducing the factor of chance into trading. It, in its turn, does not allow estimating the situation objectively. Forex Expert Advisors help to correct the situation as well as to “unload” the trader.
They are special programs or “plug-ins” that are installed on top of a trading platform (for example, MetaTrader 4 or 5) and automatically perform actions according to a specified scenario.
An additional advantage is that the advisor works very accurately and quickly responds to the situation and changes in the foreign exchange market. In addition, the program works 24 hours a day and does not need to be constantly distracted However, it should be understood that the control of the trader is still required, at least at the stage of the initial setup in accordance with the chosen strategy.