If you are reading this, chances are, you’ll have come across those adverts that go “Buy a Forex automated trading program and all you need to do is sleep and you are guaranteed become a millionaire in a month”
For those of you who have no idea what Forex trading is, it’s the trading and buying of currencies. Suppose you currently have $1000 USD, which is worth $1500 Singapore dollars. You convert it to Singapore dollars, and the next day, the Singapore dollar rises against the US dollar, so that $1000USD is only worth $1000 Singapore dollars. You convert your Sinagpore dollars back to USD, which becomes $1500 USD. That’s how Forex traders earn. Of course, in the real world, it’s more complicated, and the Sing dollar likely won’t rise so much against the US dollar overnight, but that’s basically what Forex trading is all about.
Now what causes currencies to fluctuate? Real world events, things like a government’s economic policy, whether there’s a war going on, rumours, and how much a currency is bought and sold, among others. Is it possible for a programmer to come up with a program that keeps track of all of these developments. One word. No. The only things a program can keep track of is the technical analysis part of a currency, it’s historical data and so forth.
In theory, how a perfect Forex automated trading program makes money is by recognising trends, based on past prices. that indicate whether a currency will rise or fall, coupled with using certain methods to detect when large trade is going to be executed and just assumes that real world factors like wars and the printing of new currency by governments is either unlikely or is not going to affect the market much in the long run.
However, here’s the catch, or rather, several catches.
One, new algorithms are constantly being developed and refined. Assuming that what the outrageous claims in the adverts you saw for that Forex trading program is true, this means that they have already been in the market for some time. They are yesterday’s algorithms, and trading on the market with them means pitting them against today’s algorithms. Guess what will happen to your money when that happens.
Two, real world events do affect currency prices. It’s possible that in the long run, the most perfect automated forex trading program in the world to be developed and will ever be developed will still manage to come out ahead. But to be a guaranteed millionaire within a month? No way.
If you are new to Forex trading, forget about getting rich using automatic Forex trading software. The only way you are going to be able to earn using that automated Forex trading program is by learning how to trade on your own, then using data from that program to help your analysis.
Automatic Forex trading software is not a good tool for dummy Forex traders.