Friday, November 27, 2009

Why You Really Need An Automated Forex Trading Strategy

FX automated trading (Forex or Foreign eXchange), is a type of trading that allows you to set your computer to trade by a set of parameters, and then to a certain extent forget about it. In the meantime, the computer analyzes the stock market based on its programmed logic and makes buy and sell decisions accordingly without any further input from you.

Now I wouldn’t recommend necessarily leaving any software like this running for an extended amount of time without watching it (as you never know what kind of computer bugs can get you), but for many professional traders or scalpers, these programs can prove to reap tidy little profits.

Also, since the FX market is open 24/5 (24 hours a day, Monday-Friday), FX automated trading programs like this can allow the trader to actually sleep on his short-term trades - not always the easiest thing to do if you’re “winging” it!

How do these automated forex trading computer programs work? Anyone who has studied market behavior for any extent of time knows that markets work in patterns, and since history tends to repeat itself, these patterns repeatedly come into play time and time again in the markets. The FX automated trading software’s job is to spot these repetitive high-probability areas from which it can predict the next move.

These predictions are never 100% accurate (there’s no way they could ever be), but programmed into this software is also a system for risk management - which any professional will tell you is the #1 reason for their trading success. By utilizing pattern recognition, and incorporating risk-management, these FX automated trading programs are able to provide consistent profits, day in and day out.

Why are FX automated trading systems so prolific and profitable compared to normal stock market trading systems? The reason is that most trading in the FX market is done because it has to be, not for pure profit. The banks and government entities that provide 90% of the trading volume in the FX markets do it for a multitude of reasons (arbitrage, hedging, loans to other countries), but are not motivated towards profiting off these positions.

Because there must be a winner and a loser on each side of a trade, and the big entities are not concerned about being the winners, this leaves huge potential for the small trader to profit by the proverbial “coins by the wayside.”

On top of that, FX trading systems are affording great amounts of leverage (oftentimes more than 100:1!), while stock margin accounts are limited to 2:1. All of these reasons show why FX automated trading can be an extremely lucrative way of trading for a small investor.

2 comments:

All Slots Canada said...

You have proved by giving several reasons that FX automated trading systems so prolific and profitable compared to normal stock market, so it is very beneficial trading.

Forex Trader said...

Thanks for the article. In your opinion, what’s your favorite trading strategy you trade with. Personally to implement a breakout strategy where I look FX instruments that are exiting out of a trading range. Any comments on that method.
Thanks in advance

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