Automated Forex Trading

The market place where foreign currencies are traded is known as Forex Market, which is the largest and most liquid market in the world. Trillions of dollars are traded in this market on a daily basis even with no centralized location. 

There are two ways of trading in forex.

  • Manual forex trading:

In manual trading, an individual or an expert makes the trading decisions based on a set of algorithms.

  • Automated forex trading:

It is contrast to manual trading in which a computer program helps to determine whether to buy or sell a currency pair based on a set of analyses at a given time.

Functionality of automated forex trading: 

In automated forex trading,  the traders create their own trading systems based on technical analysis rules for a selected time period in programming languages like Python or R, and instruct it to buy a certain currency against another when a shorter-term moving average moves above a longer-term moving average. The trader can also set the program to sell the same currency once its price gains a certain amount of pips. You can refer the website for more details.

Categories of automated forex trading:

There are two important categories in automated trading methodology. 

  1. EA or Expert Advisors:

In this, a highly skilled and experienced professional writes algorithms to analyze market trends and to perform the trading process. The clients can choose them based on their knowledge and accomplishments to prevent panic or anxiety while trading. A trader needs to manually decide whether or not to open the trade based on the trading signals provided by the expert advisors. 

  1. Forex robots:

This is similar to expert advisors where a software program is designed to analyze the market and trade on behalf of the trader. The difference is that no manual intervention is needed and the entire trading process is taken care of automatically. 

Pros of automated forex trading: 

  • As many individuals get involved in forex trading with no or very less knowledge about the trading processes, the automated trading comes handy where all or most of the processes can be automated. 
  • This does not need an huge investment to get started as all a trader needs is a computer with an internet connection
  • With various applications available to create a trading system through coding, the automated trading becomes easily accessible. 
  • It is easy to analyze the results and find the weaknesses and strengths of a system programmed. 

Cons of automated forex trading: 

  • Runaway losses can be caused by the trading platform or by a bug in the robot which is always the ever-present danger. 
  • The traders may be required to watch over their accounts endlessly because the automated trading has the risk of malfunction or the crash of trading robots. 
  • The traders may lack the control of their own trading fund. 

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