The Advantages Of Automated Forex Trading Software

Posted on December 5, 2008
Filed Under Investments | Leave a Comment

Can automated forex trading software really be efficient in the forex markets? Could you allow a machine to choose for you when to trade in currencies?

The very fact that you have to think about it before you answer the question shows up a major advantage that a machine has over you. Of course the problem you have is your ability to doubt things.

Expert Advisors

Automated forex trading software works by utilizing an expert advisor or EA. An EA is a set of trading indicators that, when the conditions are met, signal a trade. These are then programmed into a script and used in the software. You could do the actual analysis on your own and you could reach the same conclusion, that a trade is possible. The important point is what happens after.

The problem people have is they sometimes query the indicators and doubt their accuracy. Or you might just have some hunch and not enter the market. This is a future prediction after all. The advantage with the program is it doesn’t hesitate.

Predictable Currency Pairs

Another major advantage with a program is its ability not to get bored. In reality it will be a like nerdy kid watching the PC screen day and night thinking about the numbers. People often find this difficult to do.

As most currency pairs behave in particular patterns it’s not a problem to program a computer to check them. They either range or they trend. You only have to identify the major characteristic of their movement and combine them into an EA. All the software does then is look for these signals.

Money Management

But if it were so easy then most traders would make money and not lose money like they do. Either you or a program can only be correct some of the time. For this reason you need to protect your money properly.

You have to alter your risk to return ratio to fit with the system’s percentage of winners and maintain a profit.

Say your system gave you a gain of 150 pips for winners but minus 50 pips for losers. Basically you only need to win one from four trades and you wouldn’t lose overall. Obviously, this is simplified but the point is your automated forex trading system doesn’t need to be perfect. 

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