The international forex market owes its enormous popularity to the fact that one can work there with just a computer and an Internet connection. Thus, trades can be placed from anywhere in the world where there is a global network. Moreover, entrance to the market does not require large investments, and modern technologies provided market participants with truly unique opportunities. That includes the automation of work processes with the help of trading robots and automatic advisors.
What is automated trading in Forex
Automated trading on the forex market is a great opportunity for market participants to trade around the clock while receiving minimal physical and mental stress.
Modern systems of auto-trading can work in 24/5 mode and open/close profitable trades without human involvement.
Basically, automated forex is a special program created based on algorithms developed by advanced specialists. The software of this type allows you to apply the tried and tested schemes and due to this get a profit in the shortest possible time. In this case, the participation of a trader in the process of opening/closing orders is not obligatory.
If you are interested in auto-trading, you need to find a reliable trader and configure the system so that it duplicates all of his orders. This process needs to be periodically controlled and adjusted, so you can’t do without fundamental knowledge of the market. While the robot is doing the routine work assigned to it, the trader is developing trading strategies and dealing with non-standard situations.
How does automated Forex trading work
Automated trading is a system based on different types of analysis. It helps define whether to place a long or short position with a particular financial instrument.
Some automated programs conduct a technical analysis to make decisions about trades; other systems are guided by economic news to place buy and sell orders.
Auto-trading software comes in a variety of price ranges, with several levels of composure, to satisfy a wide scope of trading needs.
Automated traders mimic or copy what an experienced foreign exchange market participant would do. They study technical charts and forex numbers, track news and market information, and use them to decide which orders to place. They have access not only to intraday trading in the forex market but also to monitoring the market around the clock.
Here is a simple illustration: a trader designs a program and commands it to buy a particular currency against another when the short-term Moving Average moves above the long-term one. The trader configures the program to sell the same currency when its price rises by a particular number of pips. The software can buy and sell that asset without human participation.
The process of starting the auto-trader begins with an evaluation of past price data and its ability to bring hypothetical profit. The evaluation is available on a demo account, without the risk of losing real money. The function is called back-testing, and, by the way, it does not take slippage into account.
A logical starting point for automated trading is to automate trading strategies that you are already using manually. Anything you can present in a scripting language such as MQL and EasyLanguage, you can automate.
Automated trading strategies
There are lots of styles of auto-trading strategies, which differ in types of analysis. A unique type of trading system has been developed for each exchange trading format:
Trend strategies
Such strategies postulate that the price of assets can move either up/down or flat (without a settled trend). There are some regularities by which the price movement is predicted. Trending strategies involve finding a trend in different time frames. Used indicators: MA, Bollinger Bands, Bill Williams’ Alligator.
Scalping strategies
Scalping strategy means a short time of transactions’ expiry (from 30 seconds to 1-2 hours). The system doesn’t suppose the use of fundamental analysis – analysis by Scalper Dream candlesticks and indicators, wave instruments, MACD.
Wave analysis strategies
This trading system is based on the Elliott Wave Principle. The author of this principle introduced the notion in economics that the movement of asset prices occurs cyclically, according to the wave principle. The trading terminal has a built-in indicator. The analysis model assumes a three- or five-wave structure on the chart.
Breakout strategy
Breakout of the price range is a popular trading system. It is based on the construction of a price channel according to the trend. The lower and upper limits are built based on the volatility of the asset, the ratio of buyers and sellers. The breakdown of the channel in one direction or the other can indicate overbought or oversold. Various breakdown and channel indicators (including Bollinger Bands) are used.
Martingale approach
You may use the Martingale method as a basis or in addition to any other strategy. It is based solely on mathematical calculations that allow avoiding losses with an unlimited deposit. The principle of operation is that each subsequent deal after a losing order is opened with an increased lot so that the income from it overlapped the previous loss. Correspondingly, if losses are repeated, the lot is doubled from the previous value. If the order closes with a profit, the lot is set to the minimum again. No indicators are used for this trading system.
Each strategy has its own advantages and disadvantages. To get the highest profit, you need to carefully study the trading system and analyze whether it suits you as a trader. Analyzing a trading system, you need to consider the time parameters of trades and the style features of trading on the underlying market.
Automated Forex trading algorithms
The algorithms of auto-trading programs can be of two types: Expert Advisor (robot) and copy-trading. Let’s have a look at each of them separately.
Expert Advisor or robot
The principal function of trading software is to execute a predefined algorithm of actions. Automated forex trading with robots is known as “algorithmic trading”.
Standard algorithms of varying degrees of complexity are available on the Internet, but veteran players favor developing their own algorithms using the standard MQL scripting language.
Robots perform market analysis, take trade signals into account, and place orders to buy or sell currencies. It is possible to place protective orders manually or automatically and close positions by yourself or with the help of the robot. If the whole process is automated, the trader controls the quality of advisor work and traces the changes in the account balance.
One more type of automated trading goes as follows – a beginner connects to the trading activity of an experienced colleague and duplicates all the operations.
It’s important to understand that the signal provider is not always interested in the beginner’s success: he only gets a one-time fee for the permission to copy trades, not a percentage of each successful position. Still, there are some copy-trading platforms where the provider is paid the revenue share – the percentage of profit. That entails that the more accurate the forecasts, the more money the trader gets from his followers.
No surprise, many beginners are eager to follow the trading activity of some pros because it is convenient: you can control lot sizes involved in trading.
Benefits of automated Forex trading
Automated forex trading is an indispensable tool for both beginners and experienced traders. Newcomers who have entered the market recently often lack experience for continuous successful work. In this case, ready-made software comes to the rescue, providing newcomers with an opportunity to undergo practical training along with the work process itself. For experienced market participants, automated trading is a great help in their work, especially when serving multiple clients or transactions involving multiple financial instruments. Automated Expert Advisors are built into trading platforms that are publicly available online.
For all participants of the financial market, automatic trading offers unquestionable advantages: the trader’s time is significantly saved because the automatic advisors are completely autonomous and there is no need to constantly sit in front of the monitor; most trading robots can be adjusted by own algorithm, which allows to realize own strategies in practice and automatic mode; the advisor is easy to install.
Perhaps the most important factor in trading on the foreign exchange market was, is, and will be the human factor. Panic at capital losses, dulling of the clear mind with excessive enthusiasm, and other human emotions can not always play a positive role in the process of a trader’s work. Automated trading helped solve this problem: trading robots are absolutely unbiased and always act according to a strict set algorithm. Receiving a piece of objective current information from the advisor, the trader can adequately assess this or that situation on the Forex market at the moment and make the most correct decision.
Fully automated Forex robots
Now you know all the peculiarities of how automatic trading on the Forex market is realized. Unfortunately, it is impossible to give an objective assessment here. Each trader must decide how he will use the money available and insure himself against arising risks. Probably, the whole code of financial markets is hidden in the individual approach. Good luck!