Autotrading (Automated Trading in Forex)

These days it is difficult to imagine what life would be like without computer technology the Internet. Looking at it rationally, almost all modern technology harms human health in one way or another, but remain very convenient. In the modern world especially, speed and comfort are not only appreciated, but almost demanded. This desire for convenience also applies to financial markets, like the one that deals with currency trading. Forex, that is. While someone stares at a display for long periods of time to catch a convenient moment to enter the market, someone uses the convenience of automated trading and spends their time doing other things, be it even more work, or just chilling and relaxing.

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What are automated advisers?

Any financial market has a cyclical nature. Things are prone to repeating, which means that the main task of the trader is to identify patterns and the typical reactions to these identified patterns. This is one of the points where automated advisors bring in some invaluable benefits. If trading is carried out using a large number of instruments, then it is rather difficult to adequately assess the situation while continuously analyzing all the different indicators. In this case, the adviser comes in very handy in the sense that it can assist in the search for trading signals.

If there is a need to make a large number of transactions in a short period of time according to a certain algorithm, the adviser will also cope with this task much more effectively than a human could ever wish to. Testing your strategies can take a considerable amount of time. Time not everyone is willing to commit, especially towards an activity that may lead to substantial financial losses. Being able to determine the effectiveness of a strategy over large time intervals in an automated mode will allow you to save precious time and redirect your efforts towards something else. Moreover, a computer program does not require rest. It can work throughout the entire trading day, around the clock, and not break a sweat.

That being said, like any other computer program, the adviser will work only in accordance with the parameters that are incorporated in it. If the situation on the market changes, it will not be able to adapt to the new conditions, which means that it is likely that you will suffer losses.

The colorful description of the parameters of the adviser does not always correspond to its real capabilities.

Also worth noting, is that the trading strategy embodied in the adviser does not always match your trading style and the possibilities of your deposit. Experienced traders who have mastered several trading strategies, as a rule, trade on their own, without relying on advisors. Automated Forex trading should never become the primary type of trading and source of income for a market player. Naturally, this is a good and easy way to make money, however, if the adviser makes a mistake, then you should have a way to compensate the losses and maintain a stable profit, meaning calculated manual trading.

Automatic trading is a great way to gain experience in the foreign exchange market. As a rule, the novice trader, for whom the adviser is the main source of income at first, begins to understand all the different types of trading schemes and strategies. Many experienced traders, having figured out all the different approaches they may take with their trades, switch to independent trading, after which, in most cases, they have a secondary account that uses a trading advisor for passive income. This account is never the primary focus anymore, only requiring the occasional calibration of parameters every now and then.

Remember, while you don’t need to pay attention to every trade that the adviser undertakes, you do want to monitor the trading advisor on a regular basis. A successful trader must constantly adjust all parameters for the adviser to be able to work in the constantly evolving market dynamics.

So to summarize, here is why you may want to use an automated trade advisor, and why you may not want to.

Automated Trading Benefits

  1. Decreased time commitment from the trader.
  2. The possibility of combining manual and automated trading.
  3. Diversification of capital.
  4. Reduced and more calculated trade risks.
  5. The ability to mimic other traders’ trading strategies.
  6. Extra time for creative work, for example, developing and optimizing new trading strategies.
  7. The ability to implement a trading system that is difficult to apply in manual trading, one that involves complex calculations.

Automated Trading Disadvantages

  1. Any minor mistake can lead to the loss of your deposit, be it merely a fraction, or all of it. Therefore, you need to be very cautious when setting up an adviser on a real account.
  2. Advisers need constant access to the Internet, and in most cases, a dedicated server (VPS). It is convenient, but worth some money. The average cost is usually around the $5 per month mark. Note, that choosing the cheapest tariff is not something you should be doing. As a rule, the low connection speeds serve as a bottleneck for your adviser when it comes to order execution speeds. Additionally, you will not be able to activate several advisers for trading at the same time. Obviously, the processing speed of the computer and its overall performance is important – the higher it is, the better for trading.
  3. The adviser is not capable of tracking news and reacting to them. As of today, it is only capable of utilizing the algorithm embedded in its programming. Therefore, some robots can and should be periodically optimized. Some advisers that have a limitation to their modifiability simply become obsolete and are no longer worth using, since they start causing more losses rather than profits.

Automated trading is relatively new to the world of forex, and it is safe to say that it is still in its teen years. There is a lot of room for development. While it is a great option for newcomers and traders that don’t have any time to spare or don’t want to bother learning all the aspects of trading, the legitimately big money lies in manual trading. No adviser today is a match for an experienced trader that knows what he is doing. Use them as a stepping stone for learning new strategies, becoming familiar with market dynamics and the trading platform you plan on using.

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