Automated Forex System Trading is a method of making money that an increasing number of people are trying. However, it can also be a particularly good way of losing money, given that is one of the most risky investment strategies around. This means you need to be careful when considering this method of investment. And that's why I wanted to make you aware of some of the pitfalls to avoid with automated forex system trading.

As the name suggests, this style of trading relies on computers to do the trading for you. This will most commonly be in the form of what is called a Expert Advisor (EA) or Forex Robot (these terms are used interchangeably) that sits atop one of the most common charting / trading systems, known as MetaTrader4 (MT4). It's in the purchase of these Forex Robots that you need to be most cautious.

So, what do you need to be aware of when purchasing a tool to do the automated forex system trading for you?

1. Beware those huge profit claims. The fact is, although the ads might truthfully be saying that the EA made $xx,xxx in x months, this has usually been done on the most risky settings. When you run it yourself, you are much better to run it on safer settings. Sure, your profit making will be slower, but your money will be at less risk.

2. Always make sure you can run the robot in Demo mode first - and always do! Any EA making use of the MT4 platform will be able to run in demo mode. Demo mode is essentially running it with "pretend money", so that you can get an idea of how the robot really performs. You must do this to assure yourself that the robot can make profits, and won't just pour your money down the drain.

3. Make sure the robot sets Stop Loss orders - these mean it will sell its order and limit any potential losses should the market turn against its prediction.

4. Do teach yourself some of the basics of Forex Trading and keep a close eye on the robot. Although they do emphasise that you can "set and forget", at the end of the day, it's your money that the EA is playing with.