Automated Forex Trading is a technologically advanced trade approach that has become popular. It is composed of a computer program that follows specific algorithms to analyze the various pricing trends in the market and enhances trades by making important decisions on the purchasing or selling of assets or currencies. It is a hands-off approach entirely.
Only human interference occurs when people are needed to assess this approach’s performance and make and improvise algorithm changes.
Manual trading has been outdated and replaced by online Forex trading, which is faster and more efficient. With the introduction of algorithm-based trading, institutional traders became the first to use Forex trading and have been followed by retail traders.
Automated Forex Trading Explained
The concept of technical analysis is used while conducting automated forex trading, which is highly advanced and technologically primed. It applies to all kinds of assets, including Bitcoin and Ethereum trading.
To understand Automated Forex Trading better, here is a good example:
Traders are responsible for creating such automated program codes. The program is designed to recognize when the short-term moving average of a currency’s price impacts a long-term moving average. It is the best time to buy a particular currency.
Similarly, if any currency reaches a specific number of pips, the trader designed the program to sell the currency. Without the direct intervention of people, currencies and assets can be bought or sold this way.
The development of automated traders (EAs or Expert Advisers) occurs on multiple trading platforms like MetaQuotes’ MT4 and MT5, along with TradeStation. These platforms have rigid rules set regarding technical analysis, and along these lines, the program for automated trading is developed.
TradeStation’s coding language is EasyLanguage for automated traders, while MQL4 is the programming language of MT4. Forex automated trading systems are also compatible with Python and R.
Does Automated FX Trading Work, and Is it Profitable?
As institutional traders have been working with algorithmic trading for a very long time, automated trading does work well in making living trades and reasonable profits, as it is necessary to implement automation to keep up with technological trends and advancements.
To understand this better, you can test the algorithm program yourself, as self-testing is available on most platforms that offer automated trading. To do so, you can create an auto trader and try it out via back-testing.
Demo accounts allow the back-testing process, enabling traders to test out an auto-trader and assess whether it can produce profits in theory. The best part is that back-testing does not cost you any of your own money, so you are entirely safe.
All the trading strategies implanted manually can be automated now, which will be the commencement point for auto-trading. Anything is automatable if you use the MQL and EasyLanguage scripting languages. Fortunately, this is for all traders and does not require experts who are pros at scripting language.
Many communities fully support such market spaces, which are entirely virtual. An example is the MQL community. At these virtual markets, traders can conduct discussions and orders on all kinds of automated traders.
Automated Forex Trading Software
The automation of trading is of three diverse types.
Trading robots are fully-automated systems. They perform trades by deriving their signals for trading. Human intervention involves acquiring profits, minimizing losses, and managing risk parameters and lot sizes.
Signal generators use technical analysis to derive the signals for trading. Signals include vital data regarding the timing, TP/SL, price of exit or entry, etc. With the help of these signals, traders make the trades manually.
Copy Trading
By locating expert traders, one can copy their trades (also known as Social Trading), and copy trading platforms can automate this. The user chooses a trader, and the system is set to copy or follow. This way, the trades are executed automatically unless you stop them manually.
Broker-Based Automated Trading Platforms
Multiple trading platforms have an element of automation, and various CFDs/Forex brokers highly support these. The top trading platforms include:
- MetaTrader5 (MT5)
- MetaTrader4 (MT4)
- TradeStation
- ProOrder
- cTrader
- eToro Copywriter
- Ninjatrader8, etc.
All brokers may not offer automated Forex trading, as some have proprietary trading platforms. Therefore, those brokers are preferred, which offer multiple trading platforms, especially the ones highlighted above.
The trade mentioned above platforms like MT4, and MT5 are automated and offer various moving services. They contain every vital feature, including delivering high-quality community support, robot trading, social trading, etc.
Out of the list, one trading platform has a BASIC-like programming language, so it does not offer social trading. It is the ProOrder platform. Similarly, there is a lack of trading robots and algorithm-based trading at eToro.
Trading Signals
It is an important feature that most brokers offer for either a free or a small subscription fee. A few of these brokers provide their trading signals from automated analysis, while others have teams of professionals who carry out detailed research and provide trading signals.
It is where people come into the picture as only they can ensure true and supreme quality trading signal deliverance. People are also great at combining technical triggers with fundamentals and economic stimuli.
Robots
By eliminating the element of emotion and all human intervention, the generation and implementation of trading signals are automatically carried out by the Forex Trading Robots.
However, there is one factor that needs to be kept in mind. The code sequences might be brilliant and reap remarkable profits but sometimes require tweaking and adjustments.
MT4 (MetaTrader4)
Created by MetaQuotes, Metatrader4 (MT4) is a CFD-based trading platform and is a kind of currency. It has fantastic technical features like charting, advanced functionalities, and high-quality indicators.
These features have made MT4 one of the leading online trading platforms. The Expert Advisors at MT4 offer fascinating automated forex trading systems and solutions.
Free Automated Trade Software
Besides the numerous perks of automated trading, it also has some limitations. It is not always necessary that human traders will be outperformed by automated software. It is why, if people become incredibly focused on creating solutions, this might ideally reap more benefits than a software program.
For example, the Expert Advisors (EA) at MT4 offer mainly free EAs, leading to many profits. But you have to understand how the marketplace keeps shifting and changing, which leads to the requirement of EA upgrades and advancements, which are costly. However, in the end, the profits are always more than the initial costs of the EAs.
Some free automated software might be given to you by brokers with scammers trying to promote the broker and make a commission from your registration. These scammers are usually caught very quickly. However, it is essential to keep a strict check and balance.
Expert Advisors (EA)
The Expert Advisors of MT4 and MT5 are top-notch. These trading programs use C++-like language. The EAs are responsible for automated monitoring of the markets along with the timely spotting of parameter-based trading opportunities. There are multiple benefits of Expert Advisors:
- Time is saved immensely.
- The trading equation is void of the emotional factor.
- The EAs can manage all MT4 supporting markets.
- Without making your code, the third-party Expert Advisors are allowed the setup by MT4.
- Before jumping in with real money, traders can perform EA back-testing to understand the process better.
Despite the various advantages, there are some disadvantages to EA as well:
- Sometimes, haphazard and necessary codes might be put together, and many expert advisors are not that big of ‘experts.’
- If your computer runs, will your EAs only run unless you obtain a VPS?
- Human minds are still far superior and intellectual than any EA and its capabilities.
Auto-Trade Apps
Any trading platform or program offers a trading app. Mobile-friendly versions of MT4 and MT5 are also available, which support automated trading similar to the EAs.
How to use Automated Trading Most Efficiently
A few rules and regulations should be adapted to maximize profits from automated trading.
These are as follows:
- Manual training and trading experience are crucial before turning to automation.
- Technology is unreliable, and automated forex systems frequently need serious monitoring and tweaking.
- Server-based trading platforms and automated traders can help reduce the chances of mechanical failures.
- Beware of scams that offer you plenty of attractive profits. It can be done by fully developing a grasp on automated forex trading while understanding that this software also has many limitations.
