Automated Software for FOREX Trading
The foreign currency exchange market, Forex, allows traders to profit from fluctuating exchange rates. Because these changes are often quite small, Forex brokers provide high leverage to traders that can purchase vast sums of currency on a smaller balance than normally necessary. This leads to quick profits or losses, and thus most Forex trades last less than one day. Automated software lets Forex traders broaden their participation in this market for potentially greater profits.
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Purpose
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Forex automated trading lets a computer place trades for you. The computer both buys and sells seamlessly, without any manual execution from you. For this to happen, you must first have a specific trade strategy that you can translate into an algorithm. Depending on the software, the language for writing this algorithm varies, however some programs make the basic enough that a novice can proceed.
24-Hour Session
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Unlike the stock market, which trades during the day only, the Forex market operates around the clock, everywhere in the world. This is one of the important advantages of automated Forex trading. Often, significant moves in a particular currency can occur while you are sleeping, or working at another job, or away from your computer for any other reason. An automated program captures all these moves regardless of your presence.
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Emotions
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One of the great challenges to active trading and investing is the psychological stress associated with making real-time decisions where significant capital is involved. Traders often fail to stick to their own plan because of a hope that the market will turn around in their favor. Automated software for Forex trading removes this entirely. Once you create your strategy and let the computer trade for you, all real-time, emotional decisions go away.
Backtesting
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Backtesting is the process of applying a real-time trading strategy to historical price data to estimate how the strategy would have succeeded or failed in the past. It is not necessary but highly advised that you always backtest any algorithm before putting it to work with real-time automated trading. Most software that allows automated trading provides backtesting features as well, including a vast database of past prices.
Multiple Markets
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It is difficult to trade several markets simultaneously. Your attention is divided between many charts, and the challenges of managing multiple real-time trades can create high stress. Automated Forex software can monitor and trade any number of different currencies simultaneously. This is another important advantage for aggressive traders who wish to capture as many potentially profitable moves as possible.
Warning
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Even for accomplished programmers, creating a profitable algorithm is challenging work. Aside from the actual programming aspect, you must have the imagination and market knowledge to devise a consistently profitable strategy, and this is difficult for anyone. It is wise to set your automated algorithm loose on a simulation account so you are at zero risk while you test the process.
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