Forex robots are automated Forex trading systems that remove emotions from the trading equation.
Since they run on autopilot, they provide numerous benefits to brokers who cater to foreign exchange traders.
Brokers in Denmark use forex robots in various ways, including:
Automated marketing campaigns
Some brokers market their services by offering free robot software to customers without strings attached. This promotional tactic can bring new customers through the door, but it comes at a price.
To protect themselves against customer attrition, these brokerages may also charge for premium versions of the forex robot or require an ongoing subscription fee for access rights.
Since brokers do not manually monitor users’ performance reports, they must trust that the robot version remains the same throughout the subscription.
Personalized robots
Brokers may offer customers access to a personal robot based on their trading profile for a fee. In this case, the customer works with account managers to determine which variables are most important for distinguishing between winning and losing trades.
The broker’s algorithm then creates an automated Forex system that uses that data to make decisions in real-time during live market conditions. Personalized robots typically produce better results than free ones.
Still, they come at a higher cost in both time and money since account managers handle much of the research process to ensure accuracy when creating personalized forex robots for clients.
Backtesting
Brokers test it within a closed environment before installing an automated Forex system version onto their servers.
It allows them to measure the robot’s profitability before committing any funds under management (FUM) for live trading.
Brokers who backtest their robots will block or remove those that produce too many losing trades or fail to perform as promised over periods during which historical data is readily available.
Risk management
Robots are practical tools for managing portfolio volatility because they can close all open positions to prevent further losses.
They also provide brokers with detailed reports on current and historic trade performance to know when specific strategies are not performing well enough to justify FUM allocated towards their service offerings.
Trade alerts
Most automated robots deliver daily trade alerts via email, SMS text messages and social media. It allows clients to take the next step by manually entering their trades using signals provided by the robot as a catalyst.
Managed accounts
Brokers must first determine that those assets are stable enough to support additional FUM allocated towards an automated Forex system to justify managing client funds.
Some brokerages use robots as part of their marketing strategy but do not manage client accounts because they do not want to expose themselves to unnecessary risk.
In this case, a company executive might talk up the benefits of a robot within a marketing presentation given at a professional conference or trade show but then direct attendees towards one of their partner companies or affiliates for implementation instead.
These third parties typically manage the robots on the broker’s behalf while reporting performance statistics to their corporate headquarters.
Account aggregation
Since some automated Forex system subscriptions can come with a sizable price tag, brokers benefit from being able to force clients into buying multiple robot packages at once to drive up FUM and make it more profitable for them in the long run.
It is done via account aggregation, allowing firms to bundle together client accounts under one log-in portal and one trade execution platform.
The disadvantage of forced account bundling is that it adds unnecessary risk exposures for clients. They have to put all their eggs in one basket by making every critical business decision (i.e., when to buy, when to sell, how much money to commit to a trade, etc.) through the same corporate entity.
Distributor networks
Some brokers benefit from establishing distributor networks of Forex robot providers who then pay them large commissions for leads. These leads typically go into a shared database that can be accessed by both parties and used as needed for future marketing efforts without any formal restrictions on usage.
However, suppose one of these distributors starts offering service packages with unfavourable terms or conditions (i.e., high fees, hidden costs). In that case, the broker may choose to end its relationship with that company.
According to industry insiders, some distributors use algorithms that deliberately generate losing trades, engage in deceptive practices. They are not working towards client profitability but higher FUM, which justifies their larger commissions.
Such companies may eventually lose client trust or fail to attract promising leads in the future.
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