Automated forex trading is a method of trading foreign currencies with a computer program that is based on a set of analyses that help determine whether or buy or sell a currency pair at a given time. The signal generates an actual buy or sell order that is executed. Foreign exchange forex trading has become incredibly popular in recent years thanks to the ubiquity of online trading platforms and the hour nature of the market. While many institutional investors rely on algorithmic trading , retail traders have only recently been able to harness the power of automated forex trading systems.
MetaTrader, TradeStation, and other applications have made it easy to write simple computer programs based on technical analysis rules. Advanced traders may also create their own trading systems in programming languages like Python or R. For example, a trader may write a program that places a buy order for a currency pair when the day moving average crosses above the day moving average and places a sell order when the pair moves 50 pips higher.
Many forex brokers let traders automatically run these programs to execute trades. There are pros and cons to using automated forex trading systems rather than placing trades by hand.
The biggest advantage of forex trading systems is that they take the emotion out of the process, which tends to reduce the behavioral finance biases that negatively impact investment decision making.
Traders can also backtest trading system to see how they perform based on past data, which can help them fine-tune their strategies before using real capital. The downside is that successful automated forex trading systems can be difficult to develop. While backtesting may show positive results, past performance is never a guarantee of future results and many trading systems are over optimized — or curve fit — for past results. Automated forex trading systems are a great way to get started in the world of quantitative finance.
MetaTrader and other applications are free to use on demo accounts, which means that they can be a valuable way to practice building systems, backtesting them, and applying the concepts in practice by paper trading.
For example, you may want for breakouts from a prior reaction high, which is a concept that can be represented by scripting in languages like MQL. Traders may also use other platforms and scripting languages like TradeStation's EasyLanguage or programming languages like Python and R. How to Practice Day Trading. Dictionary Term Of The Day. Broker Reviews Find the best broker for your trading or investing needs See Reviews.
Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. Automated Forex Trading Share. Pros and Cons of Automated Forex Trading There are pros and cons to using automated forex trading systems rather than placing trades by hand.
Using Automated Forex Trading Systems Automated forex trading systems are a great way to get started in the world of quantitative finance. Get Free Newsletters Newsletters.More...