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There has been quite a bit of hype recently about automated Forex system trading. It seems that a new Forex trading robot that makes trades automatically is released onto the market every week. Because I trade Forex for a living, I’m always looking for new Forex trading software that can make winning trades consistently, even through risky financial conditions.

Here are the top 3 things you should look for when evaluating this type of software if you want to make good money in automated Forex system trading:

1) How Does The Forex Software Perform On Historical Back-tests?

Trading platform software, like MetaTrader 4, integrates with Automated Expert Adviser systems. This allows for historical testing that simulates the trades and decisions the Forex software would have made against historical forex market data. This testing is a reliable indicator as to how the software might make trades in your live account going forward.

An important statistic to look for in your back-test results is the win to loss ratio. The win to loss ratio will tell you how many times a winning (profitable) trade is made in proportion to how many times a losing trade is made. For example, if the automated Forex system made twenty trades, and 15 of those trades were winners, and five were losers, your win to loss ratio would be 15 to 5. This is also known as your hit rate; the software made 75% winning trades.

2) How Well Does The Software Perform on Forward Tests?

Even more important than back-test results are forward test results. Does the software perform well and make winning trades in current market conditions? To be blunt, back-test results are generally meaningless if the Forex software does not perform well under live trading conditions.

Made available by most Forex trading brokers are demo accounts, where you make live trades but don’t risk real money. Due to the risk involved in Forex trading, it is recommended that someone new to Forex trading use a demo account for the first couple of months to get a feel for the software’s win-loss ratio. When trading on a live account, ideally the Forex software will match or outperform the back-test results.

3) Risk Scaling Automation

Possibly the most important factor to look for when evaluating automated Forex system trading software is built-in risk scaling, also known as automated risk scaling. To prevent the software from trading in risky conditions, good Forex trading software should have built-in risk filters and indicators. This will help minimize automated trades during unstable market periods and reduce losing trades.