Forex Trading Systems

Over the last ten years, there’s been a large step backwards in the world of forex trading. It’s not a metaphorical ‘step backwards,’ with the industry itself regressing, but a literal one, as hundreds of thousands of top forex traders and large currency trading companies stepped back from their work stations and took a break for analysis, watching their automated software complete trades for them.

In many ways, it mirrors the boom in automation for other financial services disciplines during the last few decades. The world’s biggest stock exchanges switched to digital trading systems during a high period in the market in the 1980s, with some lagging until the 1990s. Forex exchanges were a similar follower, adopting entirely digital trading at a slightly later date in the last century.

But that said, it’s only recently that automation made its way down to the trader themselves. Forex brokers have used automated systems for years to execute major trades, but never in hope of being ‘better’ at executing them. Rather than being based around sheer convenience and efficiency, as an awful lot of automation is, forex automation appears to be about maximizing overall performance.

You see, rather than touting statistics about hours saved and money kept in the account, as is the cast with most other automation software suites, automated forex trading software is all about an overall increase in trading returns. It’s not about optimizing to save time, but optimizing by using the analytical power of computers to better understand how the market changes and adapts.

This allows trader to get a better view of the market – one that’s backed up by a robot which carries out trades on a second-by-second basis. With the right automation system, a trader needn’t be a part of the action themselves, instead relying on their software to analyze, assess, and complete trades on their behalf. It sounds tempting and lucrative, but is it a reality or a digital software pipe dream?

The truth appears to be fairly hazy, as many claim that their automated forex trading software apps are beneficial, while others claim to see no real benefit. It’s worth pointing out that there are several different automated forex trading software packages available, each of which offers a different level of trade efficiency, and in turn a different level of potential earnings for the trader using them.

For example, many forex trading software packages allow a trader to assess their current amount of capital and determine a maximum risk they’re willing to take with it. The software will then browse the forex markets for investments that are proven to perform according to past historical data, and invest according to their tolerance for risk, the likelihood of a positive return, and other factors.

This means that the software is making analytical decisions in place of the trader, based entirely on the past performance of a currency on the market. There’s a saying amongst trader that the data isn’t a liar – only other people are. Given the nature of automation software, this means that a forex robot isn’t ‘flawed’ like a trader, only interpreting pure data rather than applying its own bias to its trades.

The end result? A great deal of successful trades and currency investments, all of which are made off of past data and historical performance rather than assumptions and hearsay. While automated investment applications lack the personal touch of a trader – one that in many cases can spot great opportunities from miles away – they have the analytical skill required to complete great trades.

Now, there’s one thing that every trader is thinking, particularly before they dive into the world of automated trading – will this make me more money? The answer largely depends on how you deal with foreign currency investments now. Some trader rely on external knowledge of the markets to compete their trades, while others use a data-driven style similar to that used by automation apps.

This means that traders who rely their knowledge of foreign economies, their trade patterns, and the timing of their import and export booms, won’t feel the benefit of automated forex trading software, as its trading style is so different from their own. On the other hand, data-driven traders may love it, as it uses a similar – albeit more efficient – investment strategy to the one they’re currently using.

It’s worth pointing out, however, that despite the greater efficiency and often lucrative returns that a forex trading application can produce, none are foolproof. Many of the best forex automation suites have failed before, losing money on their investments. Past data can only take you so far, and while it’s generally a successful trade factor, it isn’t completely safe from seeing sudden market changes.

This means that automation software isn’t entirely unbeatable, at least not by the immense power of the foreign exchange markets. New events can occur and ‘top’ currencies can fall, all outside the eye of past data. If this risk doesn’t appeal to you, it’s unlikely that automated forex trading software is a winning bet for you. However, it’s equally unlikely that you could respond to such sudden changes.

Take forex automation software for what it is – a lucrative, albeit occasionally risk solution that can rapidly enhance your trades, or fall victim to sudden and unplanned market shifts. While useful as a system for improving efficiency and trading productivity, it’s unlikely that exclusively using a forex robot will make you a better trader, or in fact, improve the earnings you make from most trades.