The Advantages Of Automated Forex Trading Software
Can automated forex trading software really be effective in the money markets? Is it really a good idea to let a machine make decisions for you when trading foreign currencies?
The very fact that you must consider it before answering the question reveals a major advantage that a computer has over you. If you have not got it yet the answer is human emotion.
Expert Advisors
Automated forex trading software works by using an expert advisor or EA. This is simply a set of indicators that inform you of a trading opportunity if all conditions are met. They are put into a program script and packaged into some software. It is possible to do the actual analysis alone and you could reach the same conclusion, that a trade is possible. But what happens next?
The problem with being human is you might doubt the indicators or doubt yourself. Or you may just have some hunch and not open the trade. We are talking about predicting the future after all. The advantage with the program is it does not hesitate.
Predictable Currency Pairs
Another big advantage with a program is its power not to get bored. In reality it will be a like nerdy kid watching the PC monitor night and day processing the numbers. Humans have a lot of difficulty doing this.
As most currency pairs move in particular ways it is not a problem to program a computer to check them. They either trend or they range. You only have to pinpoint the main characteristic of their behavior and put them into an expert advisor. The software then just checks for these patterns.
Money Management
Of course, it isn’t that simple or 95% of traders wouldn’t lose their accounts. Whichever system you use it will never be right all the time. This is where proper money management plays a part.
By adjusting your risk to return ratio you can make a profit but have losing trades.
Say you dropped 50 pips for every losing trade, but gained 150 pips on your winning trades. In very simple terms you would have to win 1 in 4 times to stay even. This is obviously simplified but the point is your automated forex trading system does not have to be perfect.
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