Foreign currency trading (also known as “forex”) is one of the most complex ways of participating in the securities market. But it can also be one of the most rewarding. However, its rewards are oftentimes more material than they are emotional. That is to say, the money you get is not always worth the effort.
Foreign currency is done by trading currency in “pairs”. This means you are directly exchanging one kind of currency (like, say, the British Pound) for another (like the American Dollar).
When you enter into this exchange, you cannot then turn your “pips” of American Dollars into a third currency immediately. You have to first resolve the trade of the two currencies. But there are tons of factors, both inside and outside the trends of the currencies themselves, that can impact this trade.
As a result of these forces, foreign currency trading usually draws one of two different kinds of yields.
1. Small yields. These are profits that you get from trading foreign currency day to day. They are usually acquired as a result of thorough analysis of the price of a pair of currencies. By figuring out at what points a currency pair starts growing and stops growing, you can get small yields.
2. Big yields. With these kinds of profits, you are focusing on events outside the movement of the currency pair’s value. When NATO nations sanctioned Russia, that was an event that affected many different currencies, disrupting their normal trends. These are long term investments.
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The Problem with Foreign Currency Exchange Trading
Here is the issue you are probably going to run into when trying to make either of these kinds of yields: To do either effectively, you need to be constantly looking at either or both the trends in the market, or the events of the world. Not everyone is a professional foreign currency trader who has time for that.
So, what do you do? If you are a professional in some other field, a parent, or anyone else who cannot spend all day watching the market for any other reason, what do you do in order to participate in the foreign currency market? The answer: Use a forex robot to do it for you.
How do Forex Robots Work?
It would be a lie to say that setting up a forex robot is easy, but it is easier than the foreign currency exchange itself. The process starts by picking a currency pair for the robot to trade in.
Then, you need to apply a bit of forex knowledge. You have to tell the robot at what point to buy pips in the currency pair, as well as when to sell those pips. Those are only the most basic parameters though.
You can also choose to make your forex robot adaptive. This means that you can either have it learn, teach it, or do a mix of both. Think of a currency’s price. If it grows in value, little by little, crawling up the value chart over the course of a day, then there is not much “market force” propping it up.
In that case, it is likely to enter a reversal and start crawling back down. Then, it is wise to sell once it begins this downward crawl. However, what if the reversal is much more dramatic than that?
If a currency increases in value by 5% over the course of a day, then that is one force. But what if it increases in value by 5% over the course of a minute? That must be a much greater market force.
You can set your forex robot up to not sell if a currency is increasing in value rapidly. This will allow you to reap a much bigger reward, as dramatic increases are likely to go higher than steady increases.
Are Forex Robots Legal?
The short answer is that yes, forex robots are legal. Not only are they legal, but the primary trading platform for foreign currency (MetaTrader) has specially designed its platform for them.
It is worth noting, however, that while forex robots are legal in all countries, not every foreign currency broker will allow you to trade with one. Foreign currency brokers are the groups that give you licences to the MetaTrader software. That means in order to use a forex robot, you need the right broker.
So, now that we have all that explanation out of the way, you are probably wondering: Which foreign currency brokers allow for forex robots? We asked the same question and came away with this list.
1. IG – Best Overall Forex Robot Broker
IG is one of the most respected and well-known foreign currency brokers in the world. This means that they not only have good leverage, little to no account fees, and access to a huge number of markets. It also means that they are highly regulated, ensuring that your forex robot does not run into fraud.
The biggest boon that IG offers to foreign currency traders is the different securities you can get. In this case “securities” refers not to “things that make you safe”, but “different things you can trade for”.
Not only does IG offer basic foreign currency trading, but it also allows you to trade foreign currency options and CFDs. These are not common securities to associate with foreign currency. You will frequently see both associated with trading shares on the stock market, but not on the forex market.
The reason for this is that the foreign currency market is already risky enough. It is known for being more volatile than the stock market. Options and CFDs are risky to begin with, meaning that the volatility is compounded. But where this is a problem for a human trader, it is great for a trading bot.
Why are Bots Better at Trading Risky Securities?
Trading bots are better suited than humans for trading risky securities for two big reasons: The first is that forex robots are not afraid of the risks. They will not panic and sell for no material reason. And the second reason is the inverse of the first: They will also not become egotistical and refuse to trade for no reason.
These are the two biggest mistakes that make people lose so much money when trading options and CFDs. Because forex bots are immune to these, they can trade much more carefully and reliably.
The main problem that IG has always faced is its interface. Bad interfaces are usually not a problem with a forex robot, since the robot will be interfacing with MetaTrader anyways. But in the case of IG it can slow things down a bit. This is because IG has to step in to make MetaTraders trade options and CFDs.
Trading speed is one of the main advantages that forex robots offer traders. So, the fact that IG slows down automated trading is a concern to some people. The additional value created by the options and CFDs will outpace the slowdown in trading, but it means you have to trade them in order to balance it.
2. Interactive Brokers – Best for Advanced Forex Robots
Interactive Brokers is another foreign currency broker that has a long history of being good to its user base. Again, that means tight regulations and no commission or account fees.
But it also has a reputation for being a bit complicated. This is seen as an advantage as well, however.
What is the difference between a simple forex robot and an advanced one? The answer to that is not easy, but Interactive Brokers is a good case study in where to draw that line. It starts with the news.
Interactive Brokers offers lots of different data points that a sufficiently advanced forex robot can read, process, and use to adjust its strategy. But there is no forex robot on the planet that can read and process a news story. You simply cannot program a robot to understand all the nuances of the news.
How Does Interactive Brokers Teach Robots to Read the News?
What Interactive Brokers does to alleviate this is give their news stories associated “numerical commentary”. This is sometimes stated within the news stories, appended onto it at the end, or even sometimes hidden inside the HTML of the web page the news stories are on.
However they are presented, these numerical commentaries are values that a forex robot can read. They can then use these values to adjust their own parameters.
You can probably guess what the chief drawback of Interactive Brokers is: All of this extra stuff is only going to be helpful to a forex robot that is advanced enough to read it. Granted, it will not slow down a simpler forex robot. But it means that you are getting these advantages rather than others.
It does not help that if you want to set up a forex robot to interface with Interactive Brokers, then the interface for humans that they give you is even harder to deal with. Many users, whether they are beginners or not, have reported issues with doing even simple tasks with their bots on the platform.
Still, Interactive Brokers gives you access to a massive number of markets and currency pairs. Whether you are trading with a bot that’s advanced enough for it or not, they are a great broker to use.
3. BinaryCent – Best Forex Robot Broker for Cryptocurrency
Cryptocurrency has been around for a while now, but many brokers are still nervous around it. They treat it like someone who just came back to work after having a cold, keeping a distance while acknowledging that they are glad that they are there.
But why is this? Why all the uncertainty?
The simple answer to that question can be gleaned by comparing crypto to normal currency. Think of how long normal currency has been around. Even if the mode of trading currency has changed over the years, it’s still the same thing that is being traded. Its rules don’t change, just the speed of the trades.
Crypto is different, and BinaryCent knows it. A cryptocurrency can only be traded by a foreign currency trading bot if it is organised into a trading pair, as we discussed before. For this reason, BinaryCent has begun (and continues) the long process of turning every cryptocurrency into a currency pair.
This means that there are currency pairs between the British Pound and Bitcoin, the British Pound and Ethereum, as well as between Bitcoin and Ethereum. These pairings go between dozens of different cryptocurrencies, from highly popular ones to niche currencies used in specific circumstances.
What About BinaryCent’s Other Features?
Because BinaryCent consolidates its crypto market into a form a foreign currency bot (or foreign currency trader) can understand, its interface is known for being far above average in terms of usability.
It also has the unique feature of allowing you to pay into your trades from a card. Most brokers require that you fund your account using a bank account. This is because transferring money from a bank account is much more secure than transferring money from a debit or credit card.
But other brokers also have at least some focus on the stock market. With forex and crypto trading, your money will not be entering and leaving your account at the same rate. This means that you can safely use a credit or debit card to make purchases of everything BinaryCent has to offer.
BinaryCent does a lot to make the currency marketplace accessible. But this means that it has to exclude some methods of trade that other brokers use regularly. That means no stocks, no options, and no CFDs.
The simplicity of its interface also means that a more advanced forex robot will be wasted on it. It offers little in the way of news or analytics for an advanced forex robot to pull data from.
All in all, this makes it a great place to start for beginners with simple robots. But anyone who is looking to tinker with their forex robot will likely find it to be underwhelming and hard to optimise.
4. Videforex – Best High Speed Trading
One of the main reasons people are attracted to the foreign currency market is that it does not have a schedule. Unlike trading stocks, which relies on a real-world stock market with a real-world schedule, forex trading can be done twenty-four hours a day if you have the time and energy.
This is also why people apply bots to the foreign currency trade. Staying up for a whole day trading is possible, but nobody wants to do it. This turns bot-based foreign currency trade into a sort of math equation: Once you know you can trade constantly, suddenly the speed of trades becomes important.
Videforex is a broker that specialises in having the fastest trades on the market. They accomplish this with a focus on speeding up transaction fees. Faster transaction fees mean faster trades, if even by milliseconds. This might not seem like a lot, but over a day these milliseconds add up fast.
Consider that there are 86.4 million milliseconds in a day. That means you can only fit so many transactions into a single day. If a trade takes 25 milliseconds, then that means you get 3.4 million trades in a day. If it takes 20 milliseconds due to sped up transactions, that’s 4.3 million trades in a day.
How Long do Forex Trades Take?
It depends on the kind of trade, but definitely longer than 25 milliseconds. That is just an example. Videforex focuses on forex at its most basic level, meaning that there are no options or CFDs that would take longer. It also connects banks directly, meaning it cannot trade in cryptocurrency either.
They do, however, connect to a massive number of currency pairs. They also have a 24/7 support team that specialises in helping with foreign currency robots. Since bots are sort of taboo in some parts of the forex market, it is good to have a foreign currency broker that is not afraid to help with them.
Many of these traits come at a cost, however. For instance, connecting bank accounts like this means that you are not going to be able to trade in any other security on their platform. It also means that configuring your bot to wait for big trades is going to be less efficient than making many small trades.
While people trading on bots are generally fine with having access to little to no other securities, the lack of the option might be a turn-off to some people. This is because many people will deal with a broker in such a way that their bot is spending all day dealing in forex while they trade stocks.
Still, Videforex is a simple, fast foreign currency broker that is ready to help you with your bot.
5. Raceoption – Best Trade Copying
Setting up those parameters yourself can take days upon days of studying the market. But there are lots of reasons why you might not do that. Most people don’t have time. Most people don’t have the knowledge, or access to the knowledge. So, what do you do in those cases?
Raceoption has a solution: Trade copying. This is a method of trade strategizing that has been around for as long as the stock market has. It spread to foreign currency with the advent of the internet. The basic idea is that whether you know about how the foreign currency market works or not, someone does.
All you need to do to make a pretty penny is copy their investments. Even if you copy their investments after they happen, a fast enough forex robot will be able to do it so fast that it does not matter.
Raceoption is a broker that regularly collects and publishes information on what the biggest forex traders are doing. You can set your foreign currency robot up to copy these data points.
What Else Does Raceoption Offer?
Being a newer platform, Raceoption puts a lot into the rewards they provide for newcomers. This means trading contests that reward people with cash for trading frequently and successfully. It also means giveaways where entrees are determined by the number of trades you make in a given time frame.
Obviously, these are both great for people using a forex robot to do their trading. They even allow you to fund your account by card, rather than requiring a linked bank account.
Because they are a new broker, it must be noted that Raceoption is not as heavily regulated as other foreign currency brokers. They connect to a lot of markets, but they have just not proven themselves.
They are also rather limited in terms of what they provide. It is very much an ecosystem of trading bots, meaning that there is little community to speak of. There are also not options for securities outside of foreign currency, though they are niche enough in their specialties that this is not much of a problem.
6. IQCent – Best Diverse Trading Options
As we mentioned earlier, foreign currency is traded as investment in a foreign currency pair. But that way of trading is not just limited to foreign currency. You can trade crypto, commodities, and even some indexes in this manner.
When these securities are presented in this manner, a forex bot can trade them. This is what IQCent brings to the table. You see, the “shape” of the trade is more important to your forex robot than the contents of the trade. The bot does not care if you are trading foreign currency, cryptocurrency, or iron and gold. It just cares if it is traded in a way that it knows how to process.
IQCent organises these different securities in this way so that you can use your foreign currency trading bot to make money off of different currencies, industries, and events.
What Else Does IQCent Offer?
It is a new trader, so IQCent makes it their priority to be as intuitive as possible. This means a clean interface, around-the-clock customer service, and an easy account setup process.
It also has copy trading available, though it does not offer as much as Raceoption.
IQCent’s design is ambitious. Mixing in commodities and crypto with foreign currency trading is a complex scheme, meaning that there are a lot of ways a trader can mess it up. It does not matter if this trader is a human or a robot. Once they come across a value they can’t understand, it’s a problem.
This complexity can cause bots to malfunction. Luckily, these malfunctions will not cause the bot to buy or sell something it should not. Most bots are designed to just shut down if they run into a problem.
That still means that the unfamiliar way IQCent does things can result in your bot shutting down.
7. XTB – Best Analysis Tools
Analysis tools have two uses when you are trading using a foreign currency robot. The more traditional use is analysing the market yourself. This means looking at price shifts and utilising the tools to see where trends crop up, and then using that information to predict the future.
The other use is by integrating them into your forex robot. This is more difficult, and limited to only the most advanced forex robots, but it can mean the difference between making a little money and a lot of money. This is only possible, however, if the broker you are working with gives you the tools for it.
XTB is a broker that specialises in these tools. They give you charting tools that allow you to dictate trends to your forex robot, as well as analysis tools for finding out exactly what those trends are.
They also give you great learning resources for understanding both the market and your forex robot’s capabilities. This is the kind of bot support that very few other brokers are willing to give.
What Else Does XTB Offer?
XTB is not just a foreign currency trader. If you want, you can have your foreign currency robot handle the foreign currency trade while you focus on the trade of stocks, crypto, and indexes.
This makes XTB a massive trader, with connections to lots of markets. This is part of the reason why their research and learning tools are not just important, but critical to wrapping your head around how they work. A programmer who wants to go from forex bot trading to stocks will have to learn.
That same size is XTB’s biggest issue. It can make them feel bloated and can cause the site some problems when it interfaces with a forex robot. This can affect their analysis tools as well.
More complicated tools allow for more ways to optimise, but they also run the risk of being so complicated that they create more problems than they solve.
8. Saxo Bank – Best Portfolio Management Tools
Most people getting into forex robot trading are doing so because it affords them a degree of independence. Using a bot to trade means that you can take low-risk investments constantly, rather than trying to speculate the market based on unreliable news and analysis information.
But as nice as it is to have one’s finances independent from outside influence, not all influence is malevolent. Saxo Bank is a broker of foreign currency (among many other securities) that offers some of the best portfolio management tools on the market. In short, bots to support your bot.
This is great for rudimentary foreign currency bots that can be trusted to buy, but not necessarily to sell.
What is Portfolio Management?
Managing your portfolio starts by building one. A portfolio is the collected securities that you own. Whether this is investment in a foreign currency, different stocks, cryptocurrency holdings, or bonds you have purchased. All of these things have value.
Portfolio management means selling these things off in the right way at the right time. For instance, if a currency grows in value, then you do not always want to sell the whole investment in the currency. You probably just want to sell the part that profited. This task is too complicated for most bots.
Saxo Bank’s portfolio management bots, however, can do the job.
Saxo Bank offers tons of different securities, but many of them are too complex for a forex robot to handle. On top of that, even their portfolio management systems rely on you having a substantial enough portfolio to manage in the first place. You won’t get much out of them just starting out.
Their interface is fine, but there is only so much they can do to make it simple. In short, Saxo Bank is not a broker for traders just starting out. It benefits traders who show up to the party with a portfolio.
There is a strange taboo against using trading bots in some circles of the internet. But not here.
We recognise that many people have to work for a living, and that the ideal of the trader spending all day at a computer analysing their one big bet is a thing of the past.
Luckily, these brokers are here to offer you a place to use your bot to make a good, passive income.