Welcome Everyone, 

Forex Robots: Is yours destined for disaster?

This week I want to get back to the topic of forex robots as I have received hundreds of emails regarding the recent articles I have written on them.

Many of you have asked me for a reccomendation for a reliable and profitable inexpensive forex robot system.  With that said, let me say quite candidly that I don't think any robot system selling for $97 is going to work out in the long run.   This doesn't mean that just because someone sells a $97 robot that they are dishonest or it is crap, but, due to its mass appeal certain undesirable side effects occur which are explained below.  (As a side note, I could easily reccommend a few and make thousands of dollars a month in referral fees but…  I just don't like what I am seeing with the crop of $97 robots available.)  The bottom-line is that if I personally reccommend something it has to be because I genuinely feel that you have a long term chance of success.  Anyway…

If you are new to this blog, I have a already written about these inexpensive systems in previous posts, so please check them out to get up to speed.  To find these articles simply look to the right side of this page and you will see an area that says "Recent Posts". 

As already mentioned, I don't have anything against the $97 forex systems but…  The  plain fact is that when  thousands of  traders start usingy the same robot, it can start to under perform or just stop working.  A couple reasons are…

1.  Not everyone will get filled at the order price.  Lets says XYZ Forex System looks for a trade setup and then finds it.  It may fire off a buy limit order at a price 10 pips above the current market price.  Well as the market climbs and hits that price, it will start filling the buy limit orders from other XYZ users.  Now here's where a problem occurs…

Say there are 10,000 traders using the system…  Well the first couple hundred orders may get filled, but this will also cause the market to rapidly rise above the buy limit order level.  This means that many traders may not get into the trade at all as a broker is under no obligation to fill a limit order if the market is moving quickly.

In another scenario…  Lets say XYZ system finds a trade and iniates a buy market order.  The first traders in will get a great entry price and most likely experience a nice and profitable run up but…  Trader #500 may get filled 5 pips higher and trader #5000 may get filled 10 pips higher and trader #10,000 25 pips higher.  As a result traders will have greatly different results.  If the market has say only a 20 pip run up and a quick reversal, it is entirely possible that the first traders in ended up with a small profit and the last traders in ended up with a loss.

One email I just received said, "hey, I would think all those traders jumping in would make the system work even better!".  As I already mentioned the first traders into the trade will benefit from a lot of users using the robot but…. 

Let me explain this in another way.  Awhile ago many parts of the world had a huge run up in the real estate market. 

People who bought the earliest ended up with the highest rise in their equity because as more and more people rushed into the market, it quickly drove up prices higher and higher.  The later someone got in, the less appreciation their property saw.  Eventually someone was the last to buy before the real estate bubble burst.   These unlucky individuals  overpaid for their property and are now sitting on something that has way less value then when they first bought it.   In contrast the people who got into real estate early are still experiencing a nice overall net gain to their investment even if it is not as high as it was just before the bubble burst.  So in this example having lots and lots of people participating really helped some people greatly. The identical things happened in the big stock market crash of 2000.  

And…  It happens in all markets all the time as their are always mini "boom and bust" cycles happening on a daily basis.

 2.  Another problem that too many traders using the same forex robot system is….  When you authorize your broker to run the robot for you, the brokerage knows when your system is placing a trade.  For example…  Say your system is called "The Forex World Domination System".  Well, the name of your system will show up with your broker and the same goes with everyone using ths same system at your broker. 

So….  Say your broker notices that there are 300 pending buy market orders from the "The Forex World Domination System"..  It is the perfect opportunity for them to widen the spread so that they can make another pip or two on each order.  That can literally put thousands more dollars in their pockets on every trade.  

In another scenario…   Say your broker notices that there are 300 stop loss order sitting in the order que.  Well those stop loss orders are like waving a red flag in front of a bull with a very bad temper.  The broker can temporarily run the market against you to trigger the stop loss order and take you out of the market.  Once again, this is easy money for the broker.

The bottom-line is there are just too many people using these robots.  And one thing I forgot to mention is that,  the above obstacles to having a profitable forex robot system is already assuming the robot is actually a really good one.  The ones that are just plain crap compound the chances of disaster even more.

Over the next few weeks I will share some ideas to help you weed out the good from the bad.

Hope this gives you some food for thought and helps you make a better informed decision when buying or using a forex robot

Jeff Wilde

   VERY IMPORTANT:  If you are new to our forex  market forecast service I urge you to get up to speed on how to get the most out of it.  This will also explain what the abbreviations I use mean.  To get all the details click the link just below:          

 http://www.askjeffwilde.com/97/how-to-use-the-forex-market-forecast-service/

Here is a video that will teach you how to get the most out of this newsletter.      TO VIEW CLICK HERE: 

  Ok, lets get to it…   

 GBP/USD

TPD3 1.5513
TPD2 1.4960
TPD1 1.4360
============
TPU1 1.3492
TPU2 1.3000
TPU3 1.2500