Automated Forex Trading Systems - Are They a Scam?

[Jamie Richards]

If you're a "newbie" to forex trading beware the 'make thousands a
year with 2 hours work a week!' - run a mile and keep going. If you
want to make money you have to invest both time and money into being
successful no matter what you do. Automated forex trading systems can
make you money - but only the right system in the right hands is the
key. Read on and I'll expand on this later in the article.
There's no such thing as fully automatic - especially in forex!
First of all, to end the confusion about 'automated' meaning 'hands-
off', 'set and leave' is rubbish. These systems work on 'signals' a
simple explanation of the mechanics of the process follows.
How the systems actually work.
The signal is arrived at in two ways, by Chart and by Mathematics. The
signal is provided via a market feed into a program which firstly
analyses the data into real time data sets and then 'charts' this
data. The information is then 'formatted' and presented say for
example in Japanese candlestick format. The program then has built in
parameters which extrapolates (puts information on top of other
information) other historical information and then 'voila' you have
what is termed as a SMA (simple moving average). I have identified
this factor (one of many) as it is easy to understand and replicate
yourself (if you have the time and the patience). Where moving
averages intersect and diverge gives a buy/sell signal. An automated
trading system will recognize this and then transact for you. The
result is either a profit or a loss. More 'complicated' signals are
often used which extrapolate ratios like Fibonacci ratios and this is
where things become a little more mathematical.
These systems should be as 'Tools only'!
The key to understanding this type of 'tool' because that is really
what it is a trading tool, is that it is not a set and forget it
business in a box. If you look at it in such terms you will lose your
deposit!
The way many of these automated systems are marketed is nothing short
of a scam simply because - to get a sale many of the providers mislead
customers into thinking that because it's automated that it's
guaranteed to make them money. I would say that close to 80% of
purchasers of these systems are inadequately 'qualified' to apply
them. What do I mean by qualified? Qualified individuals tend to be
Traders who have knowledge, experience and some profitable experience
already behind them.
Let me explain why this is so. Nearly all, potentially profitable
automated trading systems require, you the user, to input the
parameters for the software to analyse and provide the signal to you.
We haven't got to the stage yet of a computer that thinks like a human
- so you have to provide the input for 'it' to make its decisions.
This is why you need a thorough understanding of charts, in particular
patterns,moving averages, support and resistance levels, stochastics
etc the list goes on and on. Think about it - if you don't know what
to put in to get your results that you want i.e. profits - how's a
program going to know?
Some forex traders do make money using these systems!
Many of these programs are quite sophisticated pieces of kit and will
work in the right hands. The top 10% of traders that make the money
'do' use automated forex trading systems from time to time - more
often than not to place take profit and stop loss orders - but these
guys know what they're doing - they have experience and knowledge
gained through failure as much as success. The famous saying to apply
here is 'Learn and Earn'.

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