People put out new automated forex trading systems virtually every week now, it seems to me. All of them produce great results on paper but when we get into live testing the bottom line can be very different, as many of us know from bitter experience.

So why does the dream turn to dust? Is it the responsibility of the user and the settings that they choose? Did the promoters fake the results? Or is there some obscure cosmic law that says that the moment a system is automated, the whole market will alter its course to stop it working?

I know that last one sounds crazy but but sometimes I have wondered and you too maybe.

But in reality I don’t believe it’s any of those causes. Maybe I will be hated for this but here’s what I believe really happens …

This is how a forex robot usually comes into existence: forex experts take a system that has been working for them (or invent a new one and backtest it), pay a programmer to turn it into a robot, and then to get back the expense of the software development and make something on it too, they sell it to anyone willing to pay.

The critical question comes in the very first step. If a system has been working for the developer for a reasonable time, no problem. But usually they act too fast. They are depending to a greater or lesser extent on backtesting. They know that people will buy a new robot, so they are certain to cover the money they put in to automation, so there is really very little risk in taking on a programmer the minute they think up a system that performs well on backtests. They do not necessarily wait for live testing.

So they go ahead and create a new automatic forex trading system. Having done that, they need to market it. They might possibly do a small amount of live testing, but that’s risky! It might make a loss. They couldn’t lie about the results so maybe it would be better not to test it on the live market, but release it right now. People are credulous and many of them will buy on the backtest results alone. Quick! the developer thinks, Let’s get it on the market now while it still looks like it works!

So what’s the problem with backtests? Nothing, if you think that future results will mirror its results in the past. But hey, isn’t that the first thing they tell you in the small print on all investment documents? “Past results are not a guarantee of future performance …”

Take this simple example. You know that the odds of winning on black in roulette are under 50%, don’t you? The zero makes it less. I think it’s about 48.5%. But statistically if you considered a couple of hundred spins you would probably not get exactly 48.5% blacks. For example you might have 51% black.

So what if you did that, considered those results and said, Wow, 51% black in backtests! Great, now I can develop a robot that always bets on black …

It would be sure to lose in the long term.

It is true that the foreign exchange market is more involved than a roulette wheel, but still I think this is basically what developers are doing if they build a forex robot based on backtests. And I believe that is why they often do not work.

I’m not saying that you shouldn’t use robots and expert advisors, not at all. An automatic forex trading system like FAP Turbo can be a wonderful tool.

I am only saying please look carefully at how they have been tested. Do not rush to buy the latest forex robot the same day that it comes out. Wait a while, watch the forums and see how other users like you get along with new automated forex trading systems before you push your money into the developer’s eager hands.

Jason Cline writes articles on forex currency trading systems software and the foreign exchange market for several websites.

See what he thinks of the best selling FAPTurbo in his FAPTurbo review.

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