Former NASA engineer develops forex trading software that yields a consistent 7% return by automatically trading for you.
Sounds too good to be true? Unfortunately it was.
If you were involved in online trading in the beginning back in 2000 you probably saw a lot of infomercials promoting various trading software products. The average cost back then was $5,000. None of those companies even exist today. What was the reason? None of those software products worked.
The premise was simple: Software would execute a trade exactly as instructed eliminating all emotions.
Think about it. In 2000 software and the internet was fast becoming an aspect of our everyday lives. We no longer needed to know how to spell, do simple arithmetic or contact a travel agent. So why shouldn't software be able to trade for us as well?
Anyone should be able to load up some trading software, connect it to their trading account, and just start watching the dollars add up. Right?
Centuries ago the idea of creating a machine that was capable of running on its own self-sustaining power was thought to be possible. You might remember it as the perpetual motion machine.
Well, to date, both are still myths.
Today the message is slightly different: Instead of software, it's called a forex robot or expert advisor. The benefit is still that these tools will automatically trade for you. The cost is much lower as well. Robots are available for less than $100 and forex brokers will give you an automated trading system for free.
Why are brokers offering these products for free? The answer is simple. These products generate a lot of trades which equal commissions in the broker's pocket. The same is true when you purchase a forex robot. The provider will tell you who you need to set up your account with because they receive a portion of the transaction cost generated by the trades the robots make. The bottom line: The incentive is that it gets the individual to trade frequently, because it is done automatically, so it is a perpetual commission machine for the broker.
Now don't get me wrong. There are some very sophisticated automated trading processes that do work. The first issue is, the individual trader is probably not going to gain access. The second issue is, these systems trade very infrequently. The benefit is that these complex trading systems monitor multiple markets and multiple entities in those markets waiting for unique anomalies to occur. Meaning in some cases, solid trading software may only have a couple of profitable trades in a 12 month period. The remaining time is spent on the sidelines out of the market. A broker could not feed his family on those commissions.
For the solo trader the recommendation is to first learn how to consistently trade manually and then once he has gained the necessary experience, use software as a filtering tool to alert the trader of a potential opportunity. The trader can then evaluate the potential setup and make the final decision whether to place the trade.
Free or low cost automated trading products fall into the category of "In Search of the Holy Grail". No one has found it yet.
Once you have gained the necessary experience using software as a filtering tool is a reasonable approach.
However history shows that as each new decade unfolds, we quickly forget what was marketed as the next great tool that will allow us to make quick money with zero effort. Time will only tell what the auto trading device of the future will be called.
Even though the concept of turning on your computer, firing up your trading robot and then heading to the golf course while your robot is making you money defies common sense, I am sure as you finish reading this another 10 or more have been sold online.
As someone once said "common sense is truly uncommon".
Visit http://www.theforextradinginstitute.com/
Steve is a seasoned professional trader and trainer with over twenty years of experience in the equities, futures and FOREX markets.
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