Automated Forex Trading Software For Traders

December 8, 2020 - Владимир Кулаков

In recent years, many traders choose to automate their trading routine, for many different reasons. There are many automating solutions available on the Internet, and all of them are programmed software. The efficacy of this trading approach is obvious – the majority of traders in the United States use automated trading Forex software regularly.

However, these solutions aren’t flawless, and many people still neglect them, and there are many well-grounded reasons for doing so. In this article, you’ll be shown some of the most relevant disadvantages and advantages of using automated trading services. But before that, let’s discuss exactly what automated trading software is.

What is automated software?

There are two general approaches to the execution of trading: manual and automated. While manual is a well-known method of trading that involves manual position management by the living being, automated method tries to supplant a human factor as much as possible.

Because of it, automated solutions usually have several key purposes:

  1. Analysis of historical and upcoming data;
  2. Making fast-reaction decisions about positions management;
  3. Removing the emotional factor from trading

As such, automated solutions need high-quality coding and programming which can only be made by professional IT-specialists after months of development. If so many resources aren’t spent on the software, it won’t be able to compete with the human brain.

So, let’s understand how the software can achieve these purposes one-by-one.

The purposes of automated software

The first key purpose – the analytical function – is developed by programming a piece of software to remember the price movements and anticipate them in the near future. The ‘near’ is a key distinction, because most automated solutions are absolutely hopeless when tasked with any sort of long-term planning.

The basic automated algorithms are essentially a package of scripts written by the developer of the particular software. The scripts can be numerous and self-teaching, if written correctly. Scripts usually come into action during a pre-scripted sequence of price movements.

As a result, the trading signal appears and in the end some decision is made as a result of this signal appearing. Of course, there are many more types of software, some don’t employ scripts, but a lot of basic solutions are written with the components and for the MetaTrader line of trading platforms.

The second key purpose – advanced decision-making – is pretty obvious. The automated software can usually monitor several charts or even accounts. Due to this, and their ability to send commands much faster and much better timed than a living being ever could, their work makes trading in theory more profitable and effective.

Of course, it’s not to say that this software is flawless. They are basically programs – they can lag, miss the opportunities or make decisions faster than you can stop them. The latter, of course, is opposite to what automated trading tries to achieve ideally. However, because software is far from ideal, you should always keep one eye on it during its work.

The third key purpose – emotionless trading – is very relevant to the trading community. So many dollars in profit were lost due to panic, fear or uncertainty of living traders. The software doesn’t know the panic or the fear, but it also makes it so that you won’t need to feel panic or the fear.

Many well-made automated solutions analyze the situation and draw the strategy for the foreseeable future. Still, you’ll have to think and sometimes give your software more information to work with, not just leave it to its devices. Even the most advanced and ‘smart’ solutions can’t fully supplant a living trader, you have to remember that.

Different types of automated solutions

When talking about automated trading, many people imagine either Expert Advisors or robots. These two products of coding are very similar, but the difference lies in the way they execute the decisions:

  1. Robots receive signals from scripts or other pieces of coding. Then they make the decision of opening or closing a position. The positions can be managed on their order
  2. Advisors, or EAs, receive signals the same way and make the same conclusions. But instead of directly making a decision, they only counsel you

By using Expert Advisors, you won’t be able to negate the consequences of your inferior (next to the programmed software) reaction. You will probably be able to grasp the situation faster and make decisions with better timing, but the software will lose some of its purpose.

Nevertheless, the robots can make mistakes, as mentioned above. That’s why EAs are considered the better of the two by many. It’s true that EAs possess a safety of sorts, in that they can’t make a decision, but rather have to wait until you approve it. It all can be condensed to how much you personally trust the robots.

The advantages of automated trading

Automated trading brings a few undeniable advantages to the world of trading. It’s especially efficient on Forex markets. That’s why automated software is so heavily discussed in that corner of the industry.

The reason why robots and EAs are efficient on Forex is because the Forex market is arguably more predictable than stock or commodity markets. There are more well-understood factors of change on Forex, unlike on stock where share values can drop from seemingly no mathematical reason.

So, it’s very nicely compatible with Forex, but what else does it bring to the table? Here’s a brief list:

  1. Automated solutions are able to process a lot more signals, charts, movements and data than living traders;
  2. Automated solutions have faster reactions that enable the robots to make a decision exactly when it needs to be done (according to the robots themselves);
  3. Automated solutions follow the plan without doubts and sidetracks;
  4. Automated solutions can theoretically be created manually

The automated software improves the trading experience very much, but you’ll still have to make sure it works as planned by keeping at least one eye on it, or maybe by only turning it on during certain circumstances when you must rely on speed of execution.

The disadvantages of automated trading

By the tone of this article, you must’ve realized that this type of trading isn’t exactly flawless. The potentially buggy performance of the robots themselves isn’t the only downside, mind you. There’s more:

  1. Automated solutions frequently turn out to be data-stealing scams – either on the acquiring stage or during the work itself;
  2. Automated solutions usually need to be bought or created manually. This, if you need a high-quality product, requires the services of a professional, and they require money;
  3. Automated solutions mostly only work with MetaTraders 4 or 5. While they are good platforms, not all traders use them

Additionally, you should remember that, like all man-made software, automated services always have bugs. They may be very good, but never flawless. Again, you have to make sure the software is working as intended by watching it at work, at least sometimes. This will also ensure that the possible scam is found in time.

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