Just What Is Automated Forex Trading?

If you combined all the stock markets of the world, the currency market would still be ten times larger. Forex, also referred to as “FX,” is foreign currency exchange. Forex traders speculate on the value of a currency and put trades that represent bulk quantities of currency units. The forex market is 24-hour, highly liquid and highly leveraged. This makes it a logical candidate for automated forex trading.

Automated Trading

Trading in any market involves the buying and selling of instruments. These may be stocks, futures, options, bonds, forex and other entities. Many traders place their orders themselves, in real-time, after they believe prices have grown to be favorable for the trading strategy they use. Automated trading places orders based on computer algorithms. There’s no real-time human interaction. The human involvement pertains to programming the algorithms with particular strategies. When the programs are made, the computer is put to work to buy then sell instruments depending on specified criteria.

Forex

Any currency only holds value when compared with another currency. They do not have intrinsic values. The U.S. dollar may rise in value against the Canadian dollar while simultaneously falling in value against the Euro. When traders engage the forex market, they trade in “currency pairs,” including the base currency and the currency used for valuation. The value for a currency pair is the same as the exchange rate between the two currencies.

Leverage

Changes in forex rates are minute. Leverage allows a trader to purchase many more currency pairs with his trading capital compared to the simple exchange rate provides. In the U.S., this leverage could be up to 100 times the normally allowed transfer of currency pair units depending on the exchange rate alone. Thus, an account with $10,000 of trading capital could purchase up to a million dollars of a currency pair. This allows traders to capitalize from small fluctuations in forex rates.

24-Hour Market

A certain benefit to automated forex trading is the ability to take advantage of strategic trading opportunities that could well be missed due to sleep and other activities. Day traders of equity products, like stock, work during normal business hours, as this is when the stock markets are open. But forex has no set schedule, thus the important moves in a currency pair can happen anytime. An automated platform will capture these events and, with strong leverage, could result in consistent daily or weekly profits.

Detached Emotions

Even if an investor has the time to trade himself, automated trading can be advantageous. The psychological challenges related to active trading are often the bottleneck that prevents a trader from succeeding. Stress is high in the trading profession, and automated trading reduces or removes most of these problems. Moreover, automated trading allows programmers and other personality types to participate in active trading after they might otherwise not consider this line of work.

Want a professional manage your forex account for you? It is best to open a forex managed account, see the performance for proof. If you want to know why forex over other investments feel free to read.