It is no secret that forex trading is more popular today than ever before. It is primarily due to the availability of a wide range of tools and software that facilitates automated trading. Automation of trading activities frees up more time for the trader as well as making the trades more efficient and profitable.
Everyone dreams of a forex robot that can trade on their behalf while guaranteeing a healthy profit on every trade. Nonetheless, this cannot happen until you have in-depth and detailed knowledge about automated forex trading. To be sure, you can utilize automated trading systems that are easily accessible in the market for your activities. However, you need to understand how to choose the best system and how to test the system. The goal here is to ensure that the system you delegate your activities to is better than you.
How do automated trading systems work?
Usually, traders get access to the forex market via platforms like MetaTrader 4, among others. Within these platforms, there are tools that traders can use for automated forex trading. These include some of the best forex indicators in the market as well as trading tools like stop loss. However, programmable software is the best for automated trading because some of them learn as they progress. Specifically, the forex expert advisors that use artificial intelligence algorithms and neural networks are ideal for trading automation. But how do they work?
Trading systems like FX expert advisors perform a range of activities simultaneously. First, the trader specifies the parameters that guide the forex robot’s trading activities. It includes stop loss, take profit levels, and so on. Then, the software enters or exits trades based on the identified crucial trading signals. Notably, the best-automated trading systems perform detailed technical analysis, after which they locate profitable trading signals. These systems can build a strategy and then use it to trade.
Automated forex trading tricks you should know
Be clear about your goals
It all starts from here, goals. As a forex trader, you need personal goals, which to some extent, speak volumes about what kind of a trader you are. For example, your goal could be to earn as much profit as possible and in the shortest period. Here, you can choose to take advantage of short-term fluctuations in the price of currency pairs. Additionally, such clarity of mind enables you to choose the best forex EA for the job.
Having clear objectives is not just a trick but also imperative. One of the worst mistakes that new traders make is to jump into forex with a blind desire to rip off the market. Partly, this is because of the hype that forex receives on numerous platforms. No wonder, few people stick to the market for long because of a string of losses.
Do you understand your automation system?
A popular mantra among expert traders is that when it comes to automated FX trading, you should never blame the robot for your losses. Instead, all the blame lies squarely with you. It is because you need to understand the automated trading system before deployment. That is why many expert traders argue that the best trading robot is the one you create by yourself.
The best trick you should know is never to use automated trading systems blindly. While developers create forex robots molded around certain strategies, they primarily serve their interests. Even when a seller claims that the system is ideal for any trader, you must find out if the system suits your goals. Every algorithmic FX trading executes trades as per the creator’s rules. In this case, you need to test the system vigorously to make sure it agrees with your rules.
Know the downsides of the system
It is common to see sellers advertise their FX EA systems as perfect. It implies that the systems do not go wrong, whatever the case. Admittedly, such systems can earn good returns, but that is not to say they do not have downsides. All automated trading systems have disadvantages, and it is up to you to identify them. It is because the seller will most likely avoid that bit.
Identifying the downsides should among the top priority objectives during the back-testing of the trading system. Make good use of demo accounts to pick apart the system. Mainly, test the system’s resilience in the case where the market is moving against the system. For example, how long will the system hold onto a trade position before pulling the plug? Besides, back-testing enables you to identify problems, if any, related to the forex charting tools in the trading system.
Automated trading is high risk but has a higher probability of earning huge profits. Any serious trader must learn how to use automated trading systems to take advantage of the 24-hour cycle of the forex market. However, it is imperative that you set your goals from the outset. These will help you to understand the system you are using. Only then will automated trading work in your favor.