The Advantages Of Automated Forex Trading Software
Can automated forex trading software really be efficient in the forex markets? Could you allow a machine to decide for you when to trade in currencies?
Beacause you had to consider that question should give you a hint of a large disadvantage you have. If you have not got it yet the answer is human emotion.
Expert Advisors
Automated forex trading software works by utilizing an expert advisor or EA. An EA is a bunch of trading indicators that, when the conditions are met, signal a trade. They are written into a program script and packaged into a piece of software. If you completed the calculations yourself you would arrive at the same place, ie. a sign to trade. The important point is what happens next.
The problem with being human is you might doubt the indicators or not trust yourself. Or you might just have some gut feeling and not open the trade. This is a future prediction after all. The advantage with the software is it does not hesitate.
Predictable Currency Pairs
The other major advantage with a robot is its ability not to get bored. In reality it can be a like nerdy kid watching the computer monitor day and night processing the numbers. Humans have a lot of difficulty doing this.
It is easy to have a computer to monitor for you because most currency pairs have predictable behavior. They either trend or they range. This means you can take the main patterns of their movements and enter them into a program. The software then just checks for these patterns.
Money Management
But if it were so simple then most traders would make a profit and not lose it like they do. Either you or a program can only be correct some of the time. This is how proper money management plays a part.
You need to alter your risk to return ratio to match the system’s percentage of winning trades and maintain a profit.
Say your system gave you a gain of 150 pips for winners but a loss of 50 pips for losers. In very simple terms you would need to win 1 in 4 times to break even. Obviously, this is simplified but the message is your automated forex trading system doesn’t need to be perfect.
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