We see new automatic forex trading systems practically every week now, it seems. They all give profitable results in the tests they show but when it comes to live testing the bottom line can be very different, as most of us know from bitter experience.

So why does the dream crumble to ashes? Is it the responsibility of the user and the settings that they chose? Did the promoters fake the results? Or is there some little known law that says that the moment a trading system is automated, the whole market will alter its course to prevent it from working?

I know that last one may sound a little crazy but but sometimes I have wondered and perhaps you have too.

But really I don’t think it is any of those causes. I may be hammered for this but here’s what I think really happens …

The way a forex robot tends to come into being is this: a trader or traders take a system that has been working for them (or devise a new one and backtest it), pay a programmer to turn it into a robot, and then to recover the cost of the programming and more besides, they market it to people like you and me.

The critical question comes in the very first step. If a system has been working for the developer for a reasonable time, fine. But usually they act too quickly. They are relying to a greater or lesser extent on backtesting. They know that new robots always sell well, so they will surely cover the money they put in to automation, so there is in fact virtually no risk in giving it to a programmer the minute they think up something that performs well on backtests. They do not wait for live testing.

So they go ahead and create a new automatic forex trading system. Having done that, they must market it. They might do a small amount of live testing, but that is risky! What if it made a loss? They won’t want to lie about the results so maybe it would be better not to run it on the live market, but release it immediately. People tend to believe what they read and far too many of them will buy on the basis of backtesting alone. Quick! the developer thinks, Let’s get it out there now while it still works!

So what is wrong with backtesting? Nothing, if you believe that future results will mirror its results in the past. But hey, isn’t that the first thing you see in the disclaimer on all investment documents? “Past results are not a guarantee of future performance …”

Take this simple example. You know that the chances of black winning in roulette are under 50%, don’t you? It’s less because of the zero. I think it is around 48.5%. But distribution patterns mean that if you recorded a few hundred spins you would probably not get exactly that number of blacks. You might easily see 51% black for example.

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

It would lose.

Of course the foreign exchange market is a little more involved than a roulette wheel, but even so I believe that’s basically what developers are doing if they build a forex automated system based on past results. And I believe that is often why they fail.

I do not mean that you shouldn’t use robots, not at all. An automated forex trading system like FAP Turbo can be a wonderful tool.

I’m only saying that we should all consider how the systems that we use have been tested. Don’t grab the latest forex robot the same day that it comes out. Wait a couple of months, check the online forums and see how other traders like you get along with new automated forex trading systems before you thrust your money into the developer’s eager hands.

Jason Cline writes articles about forex currency trading systems robots and the forex trading market for several websites.

Find out what he thinks of the best selling FAPTurbo in his FAP Turbo review.

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